How does credit line work?

In this time and age in the lending industry, there are so many funding options that are available to businesses, big or small. However, as a business owner, do you know which one is the right one for you and your business?

To better make that decision, it is a must to know and understand these funding options first and then compare which option would cater to your business needs the best.

One of these funding options that you may have been seeing and been hearing about is a credit line or line of credit. Let me tell you how this works and what are the benefits you can get from using it.

A credit line or line of credit is a type of loan where there's a preset amount of money that a lending institution or bank agreed to lend you. It is known to be one of the most flexible funding that you can get since it is funding that you can amount you can draw when you need it. Just like a credit card you can draw a portion of this amount or draw the maximum amount.

One of the good things about this funding is that you'll only have to pay for the interest of the amount that you have used or drawn. Another good thing about a credit line or line of credit is that their rates usually are lower compared to credit cards and tend to have higher limits, which is a very friendly setup for small to medium businesses.