Introduction
With prices going up every day, more and more organizations are failing due to insufficient resources. Similarly, many individuals are not making enough from their daily jobs and therefore resorting to part-time jobs that demand much work but pay very little. It is because of this that banks and other financial institutions have come up with programs to facilitate people’s needs. One such opportunity is a business credit line offered by a bank, which is often confused with a loan, which by the way also has been designed to help people in need. A business credit line however differs from a loan in various aspects.
History
Since the one language that people understand universally is ‘money’, it seemed appropriate for banks to not just remain as a place where people store their money. Banks were not exactly created for the innocent sake of storing and protecting people’s assets. They make their money from charging interest on every seemingly simple financial solution that they offer. While there is no proper date to highlight where and when this act of “humanity” started, it can however be regarded as something that was inevitable. It’s not like there isn’t a silver lining; a business credit line is supposedly a great solution to many.
Features
Something very important to remember when you walk into a bank because of financial reasons, is that to them you are not a human, but rather a talking credit score. A credit score is calculated from your previous loans and data such as how long it took you to repay your loan, what your status is like, whether you were hesitant, and the list goes on. So when you apply for a loan, it is your credit score that does the talking. If your credit score is horrible, the bank will feel sorry and tell you that the solutions that they have for you at the moment are not very great. With a poor credit score, if your application gets approved somehow, you can expect a large interest rate on the borrowed amount. The difference between a business credit line (or line of credit) and a loan, is that a loan is a fixed amount, however, a line of credit differs in the sense that you can borrow as much money as you like (based on your credit score of course), and pay interest on the amount used, and also pay interest on the amount that you don’t. That’s exactly right; a bank is going to charge you even if you do not withdraw the money because the logic behind this is that they already had the originally set amount dedicated to you. The interest you get on your line of credit is again calculated based on your credit score. Several banks offer a low interest rate during the initial course of the deal, but then shift the interest rate to a higher value when the prescribed period has ended.
Tips and comments
A business credit line can either be secured on unsecured. A secured line of credit means that the bank requires something of value as collateral. This could be a house or car that the bank could seize in the case that you don’t return the borrowed money. If the line of credit is unsecured, then basically, the bank can’t exactly take anything from you. Obviously, to get an unsecured line of credit, you will have to have a very impressive credit score.
