Skip to main content Call Us

Get a quote
(03) 9088 8369

Business Line of Credit

A business line of credit is designed to be a safety net. These can be highly beneficial for small businesses that are expanding, finding their feet, or still establishing an even cash flow. Unlike an ordinary business loan, a line of credit business loan isn’t for specific purchases. It acts similarly to a credit card you can use on anything related to your business.

This makes them perfect for when you need quick cash for unexpected costs and flexibility in repayment. You can never be sure of what the future holds, so a small business line of credit is an ideal solution that has helped thousands of Australian businesses persevere during uncertain times.

Who is a business line of credit for?

Though a business line of credit is available for any business, the people who benefit the most would be small business owners or somebody starting a new business. Having a line of credit for business purposes is extremely important for anybody in these situations because it allows them peace of mind and allows them to invest more into the business where it is needed the most.

At Universal Finance, we believe every business deserves the opportunity to be successful, so we are passionate about helping in any way we can. For example, with a business line of credit, you will only pay interest on the money you use, not the amount you borrow. This makes it a superb option for people who might otherwise need help in the initial stages of their business.

When comparing a business line of credit to other forms of credit, it offers much more flexibility and costs a business far less money in the long run. In addition, if your business is new, it can take some time to build up the business’s credit rating. As well as offering security, it can help a small business improve its credit rating, providing that the borrower keeps up with its payments.

The differences between a business loan and a business line of credit

A traditional business loan is granted to a business for a specific item(s). Once accepted, the full amount is lent to the business and payments of the total amount start almost immediately, paying interest on everything. With a business line of credit, it is very different as the total amount of credit is available to you, but you will only pay interest on the money you spend.

This means that a business line of credit offers much more flexibility. For example, even once you have paid the money back, you can use it repeatedly for the entire duration of the line of credit agreed upon between you and the lender.

Furthermore, the money can be used on absolutely anything for your business. This gives extra freedom and allows extra security when facing costs that were not predetermined or expected.

How a business line of credit works

A line of credit for business works by making an agreed amount of funds available for the whole duration of an agreed period of time. For example, if you borrowed $25,000, you would have the freedom to spend as much or as little of the available credit limit whenever you need it and on whatever you want.

If you only spend $10,000 of the full amount, you would only pay interest on the $10,000 you spent and not the remaining $15,000. When it comes to paying back the money, you are also given similar flexibility that you would have with an ordinary credit card, where you could opt for a monthly minimum payment or pay the full amount owed.

The entire funds available through your business line of credit will depend entirely on what your business needs are and how much we agree on. However, it may be possible to adjust your credit limit, depending on how well your line of credit has been maintained and if you don’t already have the maximum available limit.

Requirements for a business line of credit

Universal Finance strives to make credit available for anybody, whether you have a perfect credit score or not. However, although this is our ethos, some factors can increase the possibility of getting a business line of credit with the credit limit you want and at an interest rate that suits you.

The following variables can improve the likelihood of getting the best line of credit for your business.

  • Length of trading – The longer your business has been trading, the better. Many lenders are more likely to offer lower interest rates, higher limits, and more flexible lines of credit for companies that have been trading for at least one year.
  • Annual Turnover – The more your annual turnover is, the better line of credit your business can get. As a general rule, it is helpful to have a turnover of at least $25,000.
  • Trading history – Even if your business is new, lenders will look at your entire trading history. For example, if you are starting a new firm but have been self-employed in the industry for some time, your chance of a business line of credit is much higher.
  • A well-maintained credit score – We understand that not everyone will have an excellent credit score, but the more you can do to improve it, the better chance for a line of credit you have. It is always good to monitor your score as often as possible, as unexpected things can bring it down.
  • Collateral – Many business lines of credit are unsecured, meaning they aren’t secured with any collateral. However, if you have collateral, you will be able to apply for a much higher credit limit with your business line of credit.

What is a business line of credit?

In short, a business line of credit is a credit limitavailable for any business to cover any costs related to that business. It actssimilarly to a credit card, where you will only pay interest on the money you spendrather than the total credit limit. This makes for a much more flexible loanthan you would receive in a traditional format. It is a great way to offer asafety net throughout uncertain times for your business.

What are the advantages of getting a line of credit?

There are many advantages of having a business line of credit. Here are just a few of their benefits.

Flexibility – You will have the flexibility to pay back the loan as you wish and spend the money on whatever you need for your business. Also, it is often possible to adjust the credit limit and change the terms and conditions of your line of credit.

Having complete control – As you are only charged interest on what you spend, you are in control of the interest you pay. If the total amount of your business line of credit stays in the bank, then no interest will be charged.

Helps your business grow – A line of credit for business can provide the support that your business needs to develop and grow. Seeing as the cash is not meant for anything specific, you can buy whatever your business needs to improve. Lines of credit can not only help your business stay afloat when cash flow is disrupted, but they can help your business implement new ideas and expand where necessary sooner rather than later.

Improves business credit rating – If you manage your line of credit well, this can enhance your credit score, meaning that should your business need financial assistance in the future, it would be readily available.

Can I start a business using a line of credit?

Unfortunately, a business line of credit is not used to start a business, as they are for existing businesses only. However, this doesn’t mean it is entirely unavailable in those initial steps of your business. For example, for someone who wants to start a business but needs financial assistance, it might be possible to apply for a business loan to start a business and a business line of credit to offer additional support once the business is up and running.

How do I get a business line of credit?

When applying for a business line of credit, you will need to provide us with proof of identification and the correct documentation for your business. Once we have received this information, we will do the necessary checks and make appropriate arrangements for your line of credit.

How much business line of credit can I get?

Once accepted, your credit limit will likely range from anywhere between $1000 and $100,000, depending on your business needs and meeting specific criteria. However, for some businesses, it is possible to exceed this limit. Some businesses might even have a line of credit with a limit of $250,000 upwards.