Just like family life, business life too witnessed several ups and downs which need to be tended to carefully. One of the biggest challenges of any business is to keep its finances intact and to help one do so, Charles Spinelli shares his knowledge of business credit lines.

Business credit lines are basically financial aids granted to businesses when they may be going through some difficult financial crisis. There is a pre-determined limit to these credit lines just like in a credit card. A business can avail of these funds when required and as they keep repaying the amount the credit gets replenished.

Features Of Business Credit Lines

• Similar to the eligibility criterion of an individual, a business is also considered eligible for a particular business credit line after checking its creditworthiness. This is done to ensure that the business will be in a position to repay the borrowed amount on time.
• Some kind of annual or transaction fee is charged for such credit line
• The interest rates charged are generally variable
• The repayment plans have a monthly schedule that needs to be followed
• Till the time the borrower stays with the credit limits, some flexibility is allowed in accessing the funds

Charles Spinelli further informs that business credit lines are primarily of two categories – the secured and the unsecured business credit lines.

Secured business credit lines– a borrower of such credit has to pledge collateral, which could be real estate or equipment. The risk of the lender and the rate of interest are both low in this case.

Unsecured business credit lines – unlike the former this has a higher rate of interest and does not require collateral to be pledged. However, some kind of guarantee has to be given by the business to use such credit.

A Choice Between Traditional Business Loans And Business Credit Lines

While both are financial assistance provided to businesses, there are marked differences between the two that reason why one selects one over the other.

• Structure Of The Loan – In the traditional load a set amount is borrowed and returned at a pre-fixed time and rate of interest. A credit line on the other hand allows a business to take as much amount is required within the pre-determined amount and can be returned over a cycle or payment dates.

• Flexibility – Business credit lines offer the opportunity to not only withdraw as much as is required within the credit limit but also allow repeated withdrawals for as long as the business stays within the credit limit.

• Rate Of Interest – Unlike the traditional loan form the business credit lines have a variable interest rate. That is to say, there can be fluctuations in the credit lines which is not present in the traditional loans.

• Costing – A traditional business loan, points Charles Spinelli is most likely to have a greater upfront cost in the form of application fees. The costs in credit lines, however, is seen in the form of annual or transaction fees.

Despite the presence of traditional business loans, business credit loans are gradually taking over the market owing to their ease of repayment.