How we are responding to COVID-19 (Coronavirus). The safety of our employees, customers and communities is a priority. Learn what we are doing to take appropriate precautions while ensuring business continuity. Learn More.


6 Advantages of Opening a Commercial Line of Credit

Whether starting a business or growing an existing one, all business owners know that working capital is essential to smooth and successful operations. Choosing the right source of that working capital, however, can be tricky. Many business owners are not sure whether they should open a commercial line of credit, use a commercial credit card, take out a business term loan, or use investors. All of these approaches carry pros and cons, but the commercial line of credit offers the most flexibility and generally offers the most advantages.

Here are six advantages of commercial lines of credit:

1. Flexible Capital Supply

Unlike term loans and capital investments, commercial lines of credit mean you can take money only when you need it, and only as much as you need, instead of one lump sum.

2. Better Rates than Credit Cards

Commercial lending rates for lines of credit usually have significantly lower rates than business credit cards, making them great for mid-tier purchases.

3. Leave Your Capital Supply Untouched

Cash on hand is important to have to cover unplanned emergencies. Most business owners find that the fees and commercial lending rates paid on lines of credit are reasonable for a quick source of cash. Your capital can then be restored for long term growth.

4. Work Just Like Cash on Hand

Just like with cash in a commercial checking account, businesses can write checks or use debit cards against the commercial line of credit. This makes payment simple, and is one of the key differences between investment capital and a term loan. This gives a great amount of flexibility to how, when, and where the commercial line of credit is used.

5. No Interest on Unused Balance

With term loans, it might be prudent to take out more money than is immediately necessary, for example to cover unplanned costs or expenses. Unfortunately, that entire sum is used for calculating interest due, meaning business owners have to pay a premium for including a safety margin, whether they use that margin or not. With a line of credit, interest is only paid on the balance used, giving businesses the option to request a bigger commercial line of credit to cover surprise expenses, without having to pay for that padding.

6. Maintain Company Control

Unlike taking investment capital, which often comes with many strings, a commercial line of credit lets you maintain full control of your company and doesn’t force business owners to answer to any external demands.

Go back to the Blog