What Is A Revolving Line Of Credit?

Welcome back and thanks for joining Today, we're going to talk about revolving lines of credit

What it is? The benefits, some of the features and at the end, I have a warning that you should know So, what is a revolving line of credit? Just going to try and break this down and keep it really simple What a revolving line of credit is very simple If you get approved for let's just say a hundred thousand dollars to use even numbers And you borrow $10,000

Now, you have $90,000 remaining A great thing about a credit line is if you pay that $10,000 back, now you have a full $100,000 dollars remaining again So basically, a credit line, it works very similar to a credit card You get approved for a set amount of money, as you use that money, you have less available As your repay it, the original amount is available again

Or whatever amount you paid back becomes available So very simply, in a nutshell, you can draw, repay it and then repeat that process all over again So as you pull money and draw down on your credit line, as you repay it back that money becomes available again As you continue to keep pulling, the less and less amount of money that you have available So some of the benefits of that are (1) you only pay for what you use

Which is great If you get approved for a hundred thousand dollars, you might not need all that money That's okay You only pay for what you use So if you're going to prove for a hundred thousand and you only use 10,000, with most lines, you're only going to pay on that $10,000

So, it's a great thing to have for your business and really gives you the flexibility to use money when you need it If an opportunity arises, you can pull that money on demand and go take advantage of that opportunity If an issue pops up in your business or an unexpected challenge, maybe you're supposed to get paid for a few jobs and that wound up getting delayed and payrolls on Friday, you can pull from that line, pay your payroll and you pay me a job next week and it's okay So some important features is every lender has different guidelines for their credit lines Some cap out the dollar amount

Meaning, they only do credit lines of 50,000, a hundred thousand, 200,000 and so on Really getting with the right lender that can meet the needs of how much money you're looking for The size of a line is going to be super important Every lenders have different rates And usually depending on a number of things about you and your business will make up the rate and the cost

Some lenders collect payments back on a monthly basis Some going to weekly basis, some bi-weekly basis So you know, understanding what the terms are and how the collection process worked is really good question to ask them Something that's super important to know Some lenders only work with certain industries so they're not waste time

You really want to make sure that whoever you're working with, will be able to work with your industry Otherwise you're just wasting time we're going to apply for absolutely no reason And every lender again has different interest rates So it's really important to know and what the rate is and make sure it makes sense for your opportunity Some other feature that you're going to want to check are some charge interest on a daily basis

Some charge of interest on a monthly basis Meaning if you pulled $10,000 from your line and only had it out for 10 days, some lenders will charge you interest for those to that 10 day period Some lenders will charge you for a whole 30-day period So even if you only pulled it and use it for 10 days and repaid it back, you might be charged interest for a full 30-day period So it's definitely something you want to ask and depending on how you're going to use, the line that may make a difference or not

If you plan on using it and paying back constantly, that could one-two turning into a pretty big unexpected expense So it's definitely a good question to ask So how and where to get a revolving line of credit? There are a number of different options out there Some lenders or quality inquire that you have real estate as collateral There are many options where you don't need real estate as collateral which is great

There's a lot of business owners may not have real estate collateral that they want to use So it's important to know that upfront, so you don't waste time But typically what we would do with the client that comes to us we would have an upfront conversation Go through a few simple questions Really understand their needs, what they're looking to get accomplished by using a revolving line of credit

And then from there, we have a very simple one-page digital application that we would send out to our customer to complete And then usually we're going to look at the last 3 to 6 months of cash flow Usually via your bank statements The lines bigger 150 to 200 thousand We may ask for some recent financials

And maybe a tax return There are products out there that don't require a tax return at all or any financials, which is great There are some revolving lines of credit that are out there that work with challenged credit And there are some great products out there, they're betting very beneficial with people with excellent credit So you really want to make sure that you're working with someone has the capability to offer a number of different revolving credit line products and options across a number of different lenders to ensure that you're going to get the best provable for you and your business and your credit criteria

So as mentioned earlier, one of the warnings that I have is you know, you want to really make sure that you don't over borrow So sometimes when you come across maybe an opportunity or even a challenge in your business, you might not be exactly sure how much you're going to need If it's a challenge, it might be a temporary one but you're not sure how long that's going to last So determining how much money you need You might just not know

You also might be going into a renovation and think that you only need or think you might need 100,000 You only wind up needing 50,000 So it's really important you don't want to over borrow So sometimes when you do a term loan or a small business loan, you have to borrow a set fixed amount of money up front and then you're responsible to pay that money back and the interest back I mean even if you pay it back early and get maybe an early payment discount or didn't have to pay back the total amount, you still were paying interest on that initial amount of money that you took out

So the benefit of having a revolving credit line is that you only pull what is necessary and you only pay for what you use And another great thing is you really want to make sure that you have a credit line that can grow with your business As your business grows, you're definitely going to want to work with the lender that can grow that line with you And as your business grows usually you wind up need with you know more running to grow up So it's really important that you're partnering with the right lender that can help that grow with you

If you'd like for help or have further questions about revolving lines of credit, please check out the link below And we're more than happy to help you I really appreciate you watching my video and please subscribe and I look forward to seeing you again Thank you