How Does a Business Line of Credit Work at a Credit Union?

If you need quick access to funds to help you manage cash flow fluctuations or purchase supplies, a business line of credit is a good option. Asking yourself, "how does a business line of credit work"? Read on to learn more. 

How Does a Business Line of Credit Work?

A business line of credit at a credit union works similarly to your personal credit card but is more tailored for business expenses. Unlike a business loan where you receive a lump sum of funds upfront, a business line of credit allows you to use the funds as needed up to a predetermined limit, making it a flexible financing option.

Additionally, a business line of credit provides a safety net for unexpected expenses or cash flow gaps, helping your business to navigate challenges without disrupting its operations.

How To Choose a Business Line of Credit?

Credit unions typically offer two types of lines of credit – secured and unsecured lines of credit. Understanding each one can help narrow down which option is best for you:

• Secured line of credit – this is where credit unions require business owners to provide an asset to secure the line of credit. You can use your other bank accounts, stocks or certificate of deposit as your collateral.
• Unsecured line of credit – this type of line of credit doesn’t require business owners to provide an asset as their collateral. Typically, these are business owners who have demonstrated excellent credit and have higher business annual revenue.

What Are the Key Benefits of a Business Line of Credit?

One key benefit of a business line of credit is versatility. With a line of credit, you have access to funds without having to apply for a new loan each time you need it. The funds can help with short-term cash needs such as covering payroll, unexpected expenses and purchasing inventory or equipment.

Another great benefit of a line of credit is it helps build a business credit profile. By using your line of credit responsibly and making payments on time, your business can demonstrate its creditworthiness to credit unions which can potentially qualify you for better interest rates and loan terms, helping your business grow and expand in the long run.

How to Apply for a Business Line of Credit?

At a credit union, the process of applying for a business line of credit will require you to submit an application outlining your business’s financial information such as credit history, tax returns and other financial documents that will demonstrate that your business is in good financial standing.

The credit union will also require you to show and discuss the goals of your business, how you plan to use the line of credit and your ability to repay the funds. To learn the step-by-step application process, read our blog article about How To Get a Line of Credit for New Business.

In conclusion, a business line of credit can be a valuable financial tool for businesses that are looking for short-term funding while having flexibility in managing their day-to-day business.

At Clark County Credit Union, our commercial team has worked and helped thousands of businesses in Las Vegas get access to short-term funding. Our commercial team is here to guide you every step of the way. For more information about CCCU’s Business Line of Credit, visit www.CCCULV.org/Business-Loans or call us at 702-228-2228.