Credit Financing

What is Credit-Based Financing?

Creditbased business financing is a type of financing that is based on the borrower‘s creditworthiness. It involves the use of credit instruments such as loans, lines of credit, and credit cards to finance business operations. Creditbased business financing allows businesses to access funds quickly and easily without having to provide collateral or wait for long periods of time for approval.

Benefits of Credit-Based Financing

How Does a Small Business Line of Credit Work?

A line of credit is a form of financing that allows you to borrow up to a certain amount and then pay it back over time. It is similar to a credit card in that you can draw from the approved amount as needed, and then repay what you have spent. This type of financing is often referred to as revolving credit because you can access it again and again after repayment.

For example, if you are approved for a $60,000 small business line of credit, you may take out $40,000 and keep the other $20,000 in the pool of available funds. Once the $40,000 is paid back with interest, the full $60,000 will be available for use again without having to apply for another loan. Revolving lines of credit do not usually have term lengths; instead they are available indefinitely as long as your lender believes that you are a responsible borrower.

Business lines of credit can also be categorized into shortterm lines of credit and mediumterm lines of credit based on their qualifications, maximum fund amounts and interest rates. The longestterm lines of credit usually come from traditional banks while mediumterm and shortterm lines are typically offered by online lenders.

Additionally, business lines of credit may be secured or unsecured; secured being backed by collateral such as inventory or accounts receivable while unsecured being backed only by your personal guarantee.

Business Lines of Credit vs. Traditional Term Loans

Business lines of credit often come with lower interest rates and closing costs than traditional term loans of similar sizes. However, if you miss a payment or exceed your credit limit, the interest rate could increase significantly.

Additionally, with term loans, you pay interest for the entire repayment period while with lines of credit, you only pay interest on the amount that is drawn when you use it.

Lines of credit are better suited for recurring cash flow issues while term loans are better for specific purchases or investments. However, a business line of credit can still be used for business purchases as well.

Business Line of Credit vs. Credit Card

It is important to know the distinctions between business lines of credit and business credit cards, both of which are revolving forms of credit. Generally, credit cards have higher interest rates and come with additional fees for cash advances and balance transfers.

Additionally, payments are usually due on a monthly basis for credit cards, while lines of credit do not necessitate regular payments. Lastly, lines of credit provide access to cash.

Qualifications for a Business Life of Credit

Over $180K

Annual Revenue

630+

CREDIT SCORE

Over 1 Year

TIME IN BUSINESS

Ready to Apply?

Filthy Rich Idea makes it easy to get creditbased financing for your business. Apply online and our lending partner, Business Funding Now, will give you a decision within minutes. One of their Loan Specialists will tailor a loan package for your business needs. As soon as your application and documents are received, a dedicated Funding Advisor will be in touch to discuss the application and next steps if approved. Approval typically takes 24-48 hours, and funds can be deposited into your account the following business day. It’s that simple!

Business Funding - Knowledge Is Wealth

Lines of Credit and Credit Score Improvement

Lines of Credit and Credit Score Improvement

A line of credit is a type of loan that allows an individual or business to borrow money up to a certain limit. A line of credit is typically used for short-term financing needs, such as making purchases, paying bills, or covering emergency expenses.

What Determines Rates in a Line of Credit?

What Determines Rates in a Line of Credit?

The interest rate on a line of credit is typically determined by a combination of factors, including the borrower’s credit score, the size of the loan, the loan term and the type of collateral used to secure the loan. Other factors that may influence the rate include the lender’s risk assessment, regional economic conditions and competitive rates offered by other financial institutions.

FAQs

What information and documents do I need to apply for funding?

Our lending partners will need 3 months of bank statements, the government IDs of all applicants, 1 or 2 years of business tax documents, business P&L and balance sheets, business licenses and formation documents, and a business EIN.

What is APR?

APR stands for Annual Percentage Rate and is a measure of the cost of borrowing money. It is the interest rate expressed as a yearly rate, including fees and costs associated with the loan. It's a good way to gauge the overall cost of your loan and your planned repayment schedule.

How long does it take to get the money once my business is approved?

Once approved, transfer times vary depending on the lender, but it is possible to receive your capital in as little as 72 hours after approval. Lines of credit, on the other hand, may be used immediately upon receiving approval in some cases.

How do I pay back the funding amount?

Our lenders offer secure digital payment portals so that you can make your repayments on time and without penalty. You may be able to change due dates and other important information.

How To Best Prepare for a Business Loan

Determine the amount of money you will request—and do not request an excessive amount.

Although you may have the option of a small business loan, it is important to only request the amount of money that you need and can afford to pay back. This will demonstrate to your lender that you are financially responsible and increase your chances of approval.

Understand the limitations and costs of your loan.

Before committing to a loan, be sure to consider the speed, flexibility, and cost. Some loans are more or less flexible while others charge for speed. Understand the APR and other associated fees and costs so you can make an informed decision.

Avoid taking out multiple loans.

If you already have a loan, it is not advisable to take out another one. This is calledstacking loans and is generally not allowed, except in certain cases (e.g. having a business line of credit with a term loan). If you stack loans without the permission of your original lender, you could be in breach of your loan agreement and default on your first loan. Before taking on another loan, check with your lender to make sure it is allowed.

Ready to Apply?