The advantage of a line of credit over a business startup loan is that you have ongoing access to finance from which you can borrow when you need to. You only pay interest on what you borrow where-as with a business startup loan you pay for the whole amount borrowed.
A line of credit over a business startup loan sets out the maximum loan amount available to you. It’s your choice when, and how much, of that amount to take. When you do draw down some or all the finance, it becomes a business startup loan.
If you only draw down some of the funds, you can come back for more later if you need them. Each drawdown becomes a small business startup loan. You manage your line of credit and loans through an easy-to-use online dashboard.
Why is a line of credit better than a business startup loan for my business?
A line of credit over a business startup loan gives you flexible access to working capital that you can use for any business purpose. Different than a typical business startup loan, you’re only charged interest on the amount you actually to borrow, you can set up a line of credit, normally at no cost.
This flexibility makes a line of credit much more versatile than a traditional business startup loan. You’re in complete control of what you borrow and when. If you arrange a line of credit and then your circumstances change and you don’t need to borrow at all, it should cost you nothing.
Another benefit of a line of credit is that some lenders offer finance on an unsecured basis and don’t require any security, including personal guarantees.
What can I use my credit line and business startup loan for?
It’s your business, so you choose how to use the funds available through a business startup loan or business line of credit. Use it to:
Having access to a line of credit can protect your business from short-term cashflow challenges. It can help relieve the pressure on your bank balance at times when you need to make major payments.
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