1. Seasonal Line. Loan proceeds can only be used to finance seasonal increases of accounts receivable and inventory (or in some cases associated increased labor costs), but can be revolving or non-revolving.
2. Contract Line. This line finances the direct labor and material cost associated with performing an assignable contract and can be revolving or non-revolving.
3. Builders Line. If you are a small general contractor or builder constructing or renovating commercial or residential buildings, this can finance direct labor and material costs. The building project serves as the collateral and loans can be revolving or non-revolving.
4. Standard Asset-Based Line. This is an asset-based revolving line of credit for businesses unable to meet credit standards associated with long-term credit. It provides financing for cyclical growth, recurring and/or short-term needs. Repayment comes from converting short-term assets into cash, which is used to pay back the lender.
5. Your business can continually draw from this line of credit, based on existing assets. This line is generally used by businesses that provide credit to other businesses.
6. Small Asset-Based Line. This is an asset-based revolving line of credit of up to $200,000. It operates like a standard asset-based line except that some of the stricter servicing requirements are waived, as long as your business can show repayment ability from cash flow for the full amount.
Credit Line Tips and Warnings
• Avoid carrying a constant balance on your credit line. Periodically paying down the debt completely will keep the credit in place and your lender happy.
• One key factor in obtaining a credit line will be your business cash flow.
• If your small business doesn’t quality for a standard credit line, ask for an “asset-based” line.
• Remember, the best time to set up a small business line of credit is before your business actually needs it.
