A business line of credit (LOC) can be a vital tool for managing cash flow. Line of credit is like having a peace of mind for your business. Liberty is a peace of mind.
Handling unexpected expenses and financing short-term needs, business line of credit can be a life saver? What if you don’t have a line of credit? What’s your next funding source?
In this page, we’ll cover a lot about Business Line of Credit.
At Liberty Capital’s we’ve coined the LOC as a “LIFO” loan product.
Understanding the “LIFO” Loan Product: LIFO Concept: “LIFO” stands for “Last In, First Out,” a term commonly used in inventory accounting. Applied to a loan product:
In inventory management, we often talk about LIFO (Last In, First Out) and FIFO (First In, First Out) methods. The LIFO Principle in Inventory Management
- LIFO (Last In, First Out): The most recently acquired items are the first to be sold or used.
- FIFO (First In, First Out): The oldest items are the first to be sold or used.
Applying LIFO to Lines of Credit
When we think about business line of credit (LOC) as a LIFO product, it means the following:
- Last loan to get offered: It’s one of the hardest financial products for a business to obtain. Only the most profitable businesses with the strongest credit scores can qualify.
- First loan to get cut: During economic downturns or financial strain, this line of credit is the first to be reduced, cut or revoked by lenders.
Characteristics and Challenges of the Business Line of Credit.
- Stringent Qualification Criteria:
- Min $25K bank deposit, no NSF, no prior default,
- Min 12–24-month time in business
- Min 650 FICO
- Profitability and Strong Credit Required: Only businesses with a proven track record of profitability can be helpful, and strong credit scores are eligible. Programs for business that’s revolving requires that you cashflow is strong even without profit.
- Illusiveness and Demand: The line of credit product is highly sought after but difficult to obtain, creating an allure and exclusivity around it.
- Limited Credit Line: Always Maxed Out
- Businesses often find the provided credit line insufficient, resulting in it being perpetually maxed out. This can lead to higher financial strain as companies are forced to seek additional financing options.
- Line of credit alternatives or supplemental loans:
- Business Term Loans: When the LOC is maxed out, businesses might resort to term loans with higher interest rates. Fixed payment is a benefit.
- Business Credit Cards: Further financial strain leads to reliance on credit cards, which often have even higher interest rates. Mismanagement here can affect personal credit scores.
- Merchant Cash Advances: As a last resort, businesses may turn to merchant cash advances, which can be extremely costly and detrimental in the long term.
- Similarities to HELOCs:
- Vulnerability in Economic Downturns: Just as Home Equity Lines of Credit (HELOCs) are among the first to be cut when the housing market falters, business lines of credit like the LIFO loan product are the first to be reduced during economic hardships. This makes them unreliable during financial crises.
Benefits of working with Liberty Capital.
Liberty Capital offers a practical solution for small business owners looking to manage costs, access tax capital through various funding sources, and maintain accessibility from a trusted business loan broker.
Business funding can be a complicated process, so you must not do it alone. Working with a business loan broker who knows how to package the best approval will only help get you the right financing.
While loans provide advantages like hedging against inflation and preserving cash flow, it is essential to weigh these benefits against the potential long-term costs and lack of asset ownership. By understanding the full range of financing options based on your company, personal profiles, and financial standing, you can make informed decisions, save time without having to bank hop not knowing the lender you applied at places all does A Credit, but you are a C credit? How would you know? Let the expert do the work for you so you can go back doing what you’re good at, running your business.
We are on your side, your best support for your business’s growth and financial health. Contact Liberty Capital today to explore the best business term loans for your business so you can expand and grow with a peace of mind.
Other Business Financing Programs offered by Liberty Capital:
Liberty Capital offers a variety of financing programs to suit different needs, including:
- Lease-to-Own Programs: Allows businesses to eventually own the equipment after fulfilling lease terms.
- Equipment Finance Agreement: Traditional financing with fixed monthly payments and terms up to several years.
- Working Capital Loans: Short-term loans to cover operational costs or down payments on equipment.
- Seasonal Payment Plans: Customized payment schedules to match the seasonal revenue patterns of your business.
- Term Loans: Term loans allows you to have a predictable loan term to 3-5 years.
- Factoring: Capital upfront from your account receivable to cover operational costs or down payments on equipment.
- Commercial Loan: Including SBA 504, we are a commercial loan broker for 4+ unit commercial property needing commercial loans purchase, refi, ground up funding or condo conversation, bridge loans on commercial property, condos and apartments.
- Merchant Cash Advance: Mostly known for unbankable type of borrowers. Purely based on purchase of future revenue. Revenue based funding. Revenue purchase agreement funding.
How to apply for a business line of credit?
Liberty Capital is committed to helping small business owners acquire the business line of credit they need to thrive. So, we make it simple for you to apply using our Simple Application, you can upload proof of income (3 months bank statements).
Join the thousands of businesses that have trusted Liberty Capital Group with their financing needs. They’re eager and ready to achieve your business goals and take your business to new heights.