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What Is a Line of Credit vs. Credit Card

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Borrowing money is par for the course when you run a small business – emergencies arise and opportunities pop up, and both require quick access to cash. For many small business owners, it’s a toss-up between taking out a line of credit or putting expenses on a credit card. Deciding which funding method makes sense for you depends on your credit score, funding needs and the type of business you’re running.

 

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What is a line of credit?

A line of credit is a revolving loan that allows business owners to draw down money as they need it. The money can be used to address business expenses or to bankroll growth. There is no lump sum disbursement with a revolving line of credit, it works like a credit card. You only pay interest on the money you use.

How does a revolving line of credit work?

A revolving line of credit is a business loan that you can continually drawdown and repay. The credit limit on lines of credit typically range from $1,000 to $250,000, although some lenders will go even higher.

A small business line of credit is renewed annually, with interest accruing once you draw down money. Most have a variable interest rate, which means it changes with the prevailing interest rate in the market.

To obtain a line of credit, you and your business undergo a credit review in which your credit history is picked apart. That will determine the interest rate and credit line. In some cases, a personal guarantee is required to win approval for a revolving credit line.

 “Lines of credit are harder to get than a business credit card,” said Ted Rossman an industry analyst at CreditCards.com. “You have to be in business for at least three years and have at least $250,000 in annual revenue. Some online lenders lower the threshold.”

What are the types of lines of credit to consider?

There are two main types of business lines of credit: secured and unsecured.

  • Secured lines of credit require the business owner to offer collateral. If the debt goes unpaid the lender gets the piece of equipment or real estate. Secured lines of credit tend to have higher limits and lower interest rates because you have skin in the game. Secured lines of credit are required for funding of more than $100,000.
  • Unsecured lines of credit don’t require you to pledge collateral, but you may have to sign a personal guarantee. That means if your business doesn’t pay back the money, the bank or lender can come after your personal assets. Unsecured lines of credit tend to have lower limits and higher interest rates. Many unsecured credit lines have a credit limit from $10,000 to $100,000.

“A personal guarantee can be required if your business doesn’t have paperwork or you’re a sole proprietor,” said Michael Levin, a professor at Otterbein University. “They want proof you can pay the loan back.”

When should you choose a line of credit?

There are several reasons why a business owner would want to use a line of credit, including these four scenarios.

  1. Fund growth: Business owners in growth mode can benefit from a business line of credit. It can be used to purchase new equipment, launch a marketing campaign, or otherwise grow your enterprise. “If you are expanding your business or entering a new market a business line of credit makes sense,” said Levin.
  2. Fill cash-flow gaps: Many small businesses don’t get paid on the spot for their services. Sometimes it can take sixty to ninety days. That can negatively impact cash flow. A line of credit can be used to fill any gaps while you await payment.
  3. Peace of mind: Unexpected emergencies and expenses is part of running a business. If you aren’t prepared, it could spell your business’s demise. A line of credit is insurance against that, acting as a cushion when you need cash.
  4. Builds your business credit rating: If you maintain your line of credit, it will be reflected in your business credit score. The higher that is, the lower the cost of future borrowing.

How do I get a line of credit?

Business owners have options when applying for a line of credit. Banks and credit unions offer business lines of credit, as do credit card issuers and online lenders. It’s important to shop around since the interest rate will vary from one lender to the next. Levin said to start with your existing financial institution and take it from there. They already have a relationship with you and may offer deals if you have a business banking account.

Online lenders are another option. They tend to be more lenient than banks in approving borrowers, but the interest rate may be higher.

“A general rule of thumb: for banks, you have to be in business for three years and have $250,000 in annual revenue; for online players, it’s one year and $100,000,” said Rossman.

What is a business credit card?

A business credit card is also a revolving line of credit that can be used to make purchases. Credit cardholders pay annual interest and fees, otherwise known as the annual percentage rate (APR). Many business credit cards have rewards and loyalty programs that give you cash back and/or points on purchases.

How does a business credit card work?

Business credit cards act the same way that personal credit cards do. You use them for purchases online and in stores and are required to pay a monthly balance. If you don’t pay the entire amount, it carries over to the next pay period and interest is tacked on. Credit card debt can get expensive, particularly if the APR is high. Also, some credit card issuers charge an annual fee.

Business credit card issuers look at your personal and business credit scores when approving you for credit. If you have a high credit score, you’ll get a lower interest rate on your card than someone with a poor credit score. If you default on your credit card it will have a negative impact on your personal credit score and standing.

Business credit cards have a lot of perks if you use them responsibly. To get your business, credit card companies will lure you with generous rewards and bonuses. They know businesses tend to spend a lot of money each month and they will go to great lengths to win your business. Most offer 0% introductory APR, sign-up bonus, and generous cashback or point on purchases.

When should you choose a business credit card?

Business credit cards can be very useful for business owners, granted they are paying off the balance each month and avoid racking up credit card debt. Here’s a look at three of the big reasons why you may want to use a business credit card.

  1. Rewards you for purchases: A big perk of using a business credit card for purchases is the rewards. From cashback to free flights, business owners can rack up serious cash and rewards with a credit card.
  2. Prevents comingling of accounts: Having a business credit card helps you keep business and personal expenses separate. Whether you’re just starting out or have been in business for years, best practice is to have a separate business and personal checking account. This applies to credit cards too. Having a business credit card helps you keep your expenses separate and also makes it easier to track them.
  3. Builds your business credit score: Just like a line of credit a business credit card can help you establish or build your credit score. If you use the card responsibly, your rating with the credit rating bureaus will increase over time. That will make it easier and cheaper to borrow money the next time around. A lower monthly payment on future credit card debt is welcome news to business owners.

Line of credit vs credit card: which should you choose?

There are several differences between lines of credit and business credit cards. Which one makes sense for you depends on your credit standing, funding needs and business type. Consider the following four questions.

  • Which can you qualify for? Business credit lines are harder to get than business credit cards, requiring you to have an established operation. According to Rossman, the interest rate on both products are in similar ranges, although you may pay more with a credit card depending on your credit score. If you and/or your business don’t have stellar credit, you have a better chance of getting approved for a business credit card than credit line. [Read related article: How to Apply for a Business Credit Card if You Have Bad Credit]
  • How established is your business? If you are a sole proprietor or a new business owner who doesn’t yet have any financial documentation for your business, a credit card is the better choice. Typically, with a business line of credit, lenders require you to have one to three years in business and $100,000 to $250,000 in annual sales.
  • How do you plan to use it? If you need money to make a large one-time purchase or for small expenses like office supplies, a business credit card makes more sense. If it’s for large recurring expenses like inventory purchases, emergencies or to fund growth, a credit line is a better option.
  • Do you travel or make a lot of small purchases for your business? If you travel a lot for business or have a lot of small, regular purchases, a business credit card may be the better option because you can rack up a lot of miles and/or cashback rewards, granted you pay your balance each month.

“It depends on the type of business you have. If you do a lot of traveling as part of your business than a business credit card makes sense,” said Levin. “If you are trying to structurally increase your business, a business line of credit makes more sense.”

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Pima Supes address eviction protections

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TUCSON, Ariz. (KGUN) — Economic fallout from COVID has cranked up concerns about evictions as tenants have trouble paying. There are Federal protections to reduce evictions in the pandemic but Pima County Supervisors are concerned about evictions that could bypass those safeguards.

Federal restrictions from the Centers for Disease Control restrict evictions if they could increase health risks in general— or the risk of spreading COVID because someone is put out of a home. Those protections are based on whether someone has trouble paying the rent.

Landlords and their lawyers spoke at this week’s Supervisors meeting. They say compared to keeping a tenant, an eviction is a loss for everyone. They want county rental assistance programs to move much faster to channel Federal grants to help tenants pay rent and help landlords cover their expenses.

Steve Huffman of the Tucson Association of Realtors reminded Supervisors tenants will still have to pay back rent and if they can’t it could hurt them long term.

“Many of them have huge judgments that will be issued against them eventually they will owe back rent for the time that they have not been paying rent, those judgments will create bad credit, and will interfere with future housing opportunities, and also future job opportunities.”

Tenants who create other problems beside non-payment or rent can still be taken to court and evicted.

But Pima Supervisors are concerned about reports of people evicted over questionable claims like a car parked in the wrong space or a toilet clogged too many times.

Chairperson Sharon Bronson says these eviction issues are focused by COVID but call for a broader look at how people become homeless.

“We are addressing basically the pandemic issues right now, but this may be, you know, an opportunity to just began the discussion about the larger discussion about homelessness and addiction down the road.”

Supervisors agreed to ask an existing task force on evictions during COVID to take a fresh look at eviction issues, especially in light of possible policy changes under the Biden Administration.



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Loans Bad Credit Online – PNC Personal loan 2021 Review | Fintech Zoom

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Loans Bad Credit Online – PNC Personal loan 2021 Review

Top perks

Low minimum loan amount

Customers can borrow $1,000 to $20,000. That minimum loan amount of $1,000 is unusual in the personal loan industry. A low minimum threshold means you can get the cash you need to cover small emergencies without being tied down to a larger loan.

Wide range of repayment terms

You have between 6 and 60 months to repay the loan. There are pros and cons to longer repayment terms, so this flexibility allows you to customize your term to your situation.. With PNC, you have the option of designing a repayment plan that fits your monthly budget.

Joint applicants welcome

Whether you need a joint applicant’s high credit score to qualify for a lower loan interest rate or someone has decided to co-assume responsibility for a personal loan, PNC allows for joint applicants.

What could be improved

Terms depend on location

The first thing you will be asked is where you live. On its loan homepage, PNC states that “PNC product and feature availability varies by location.” While this may be good news for borrowers in some areas of the country, it could be bad for others. You’ll need to see what it means for you.

Lowest interest rate reserved

If you’re looking to borrow enough to make repairs to your roof or buy a new furnace, you might not borrow enough to qualify for PNC’s lowest advertised interest rate. That’s because that low interest rate is reserved for those borrowing more money. For example, PNC will automatically assign a $5,000 loan a higher interest rate than a $15,000 loan.

Loans Bad Credit Online – PNC Personal loan 2021 Review

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Loans Bad Credit Online – Loans Bad Credit Online – PNC Personal loan 2021 Review | Fintech Zoom | Fintech Zoom

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Loans Bad Credit Online – Loans Bad Credit Online – PNC Personal loan 2021 Review | Fintech Zoom

Loans Bad Credit Online – PNC Personal loan 2021 Review

Top perks

Low minimum loan amount

Customers can borrow $1,000 to $20,000. That minimum loan amount of $1,000 is unusual in the personal loan industry. A low minimum threshold means you can get the cash you need to cover small emergencies without being tied down to a larger loan.

Wide range of repayment terms

You have between 6 and 60 months to repay the loan. There are pros and cons to longer repayment terms, so this flexibility allows you to customize your term to your situation.. With PNC, you have the option of designing a repayment plan that fits your monthly budget.

Joint applicants welcome

Whether you need a joint applicant’s high credit score to qualify for a lower loan interest rate or someone has decided to co-assume responsibility for a personal loan, PNC allows for joint applicants.

What could be improved

Terms depend on location

The first thing you will be asked is where you live. On its loan homepage, PNC states that “PNC product and feature availability varies by location.” While this may be good news for borrowers in some areas of the country, it could be bad for others. You’ll need to see what it means for you.

Lowest interest rate reserved

If you’re looking to borrow enough to make repairs to your roof or buy a new furnace, you might not borrow enough to qualify for PNC’s lowest advertised interest rate. That’s because that low interest rate is reserved for those borrowing more money. For example, PNC will automatically assign a $5,000 loan a higher interest rate than a $15,000 loan.

Loans Bad Credit Online – PNC Personal loan 2021 Review

Tags: Loans Bad Credit Online

Loans Bad Credit Online – Loans Bad Credit Online – PNC Personal loan 2021 Review | Fintech Zoom

Tags: Loans Bad Credit Online

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