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How to Use a Business Line of Credit

When you’re running a business, there are numerous financial decisions you need to make that will impact the future of your company and employees. It’s crucial that business owners have financial solutions available for every possible scenario. One of the best ways a business can gain access to the funds they need is through a business line of credit. Learn how to use a business line of credit to keep your company’s financial plans on track for success.

Ready to attain flexible, easy-to-access working capital? Open a Union Community Bank Business Line of Credit today.

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What is a Business Line of Credit?

A business line of credit works much like a personal line of credit. It’s a financial option that allows a company to draw upon a predetermined amount of money. Once set up with a line of credit, the business simply needs to request a draw from the line. This line of credit can be paid back at any time.

How to Use a Business Line of Credit

There are any number of expenses that can be financed with a business line of credit. Typically, they are used for short-term funding, unexpected expenses, and day-to-day operations.

Uses for Business Lines of Credit Include: 

  • Payroll
  • Purchasing supplies
  • Increasing working capital
  • Seasonal expenses

Access to funds is also helpful to maintain cash flow. Many businesses will, at one time or another, have cash flow issues. A problem with cash flow can be caused by a variety of things, such as when clients are late on payments. Lines of credit will provide your business with the funds needed to continue to function properly until you receive payment.

Types of Lines of Credit

There are numerous ways to classify lines of credit; however, there are two main ways to classify them.

Secured Lines: A line of credit that allows a business to use personal and corporate collateral to secure repayment of the loan in the event that the company defaults on the payment. Collateral can include accounts receivable, inventory, real estate, or other high value items.

Unsecured Lines: A line of credit that does not have specific collateral attached to the account in the event of a default. This type of loan is typically guaranteed by the company and personally by the owner. This means that in the event of a default, the owner can be sued.

Applying for a Business Line of Credit

The best time to apply for a business line of credit is before you need it. It’s easier for a business to get a loan while revenues are strong. Apply ahead of time so you have access to the line of credit when you need it.

When going to get a business line of credit, bring the following with you: 

  • Your current personal financial statement
  • Minimum of 2 years of business tax returns
  • Minimum of 2 years personal tax return

Other Financial Options for Businesses

A line of credit is a great choice when you need access to funds regularly for a variety of reasons. However, if you have a specific financial goal in mind, a business term loan might be the better option for your business. Tying up your line of credit on a long-term investment limits your line of credit’s flexibility and makes it unavailable in the case of an emergency. Larger projects that would need to be paid off over a longer period of time are more ideal for business term loans.

Business lines of credit are not charged on the part of the line that is unused, whereas a business loan is for a set amount and you’re charged for the whole loan. A line of credit is meant to be drawn upon when needed; a business loan is typically obtained with a specific financial goal in mind.

Does your business need a Business Term Loan? Learn more about Union Community Banks Business Term Loans today.

Utilize a Business Line of Credit Today

Union Community Bank partners with businesses to provide them with the tools and services needed to be successful. Our business lines of credit offer highly competitive rates and you only make payments when you use the line.

The Union Main Street Business Banking Team is Ready to Help

Contact us today to learn more about the line of credit options available to your business or visit one of our 14 convenient locations.

Peter Miklos
Peter Miklos
Chief Lending Officer 717.928.2315 NMLS #810113 View My Profile
Mike Farina
Mike Farina
Business Banker, Lancaster 717.928.2383 NMLS #615577 View My Profile
Bob Bradfield
Bob Bradfield
Business Banker, Lancaster 717.928.2348 NMLS #360954 View My Profile
Mike Maurer
Mike Maurer
Commercial Loan Officer, Lancaster 717.928.2312 NMLS #456883 View My Profile
Craig Portner
Craig Portner
Commercial Loan Officer, Lancaster 717.928.2319 NMLS #456888 View My Profile
Deb Dupler
Deb Dupler
Business Banker, Lancaster 717.492.2238 NMLS #456874 View My Profile
Jamie Muir
Jamie Muir
Commercial Loan Officer, Lancaster 717.572.9488 NMLS #1201507 View My Profile
Jeff Grove
Jeff Grove
Commercial Loan Officer, York 717.449.0860 NMLS #1254096 View My Profile
Chau Nguyen
Chau Nguyen
Commercial Loan Officer, Lancaster 717.519.9156 NMLS #1291841 View My Profile
Virginia Klingensmith
Virginia Klingensmith
Commercial Portfolio Manager 717.928.2313 NMLS #404960 View My Profile
Jeff Snyder
Jeff Snyder
Commercial Loan Manager, York 717.881.6959
Nathan Edmunds
Nate Edmunds
Commercial Loan Officer, Chester 267.565.9768 NMLS #1590306 View My Profile
Brady Barnes
Brady Barnes
Commercial Loan Officer, York 717-916-3313 View My Profile

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