Once you’ve established a track record, you can seek to expand the credit line in small steps. Many major banks that serve small business offer unsecured business credit lines of $5,000 to $100,000 for firms that have been around at least 2 years. These include well known commercial banks such as – including Bank of America, Wells Fargo, US Bank, Chase and Key Bank, as well as community banks, credit unions, online banks and some you might not have thought of such as American Express Bank, Capital One Bank, Discover Bank and Advanta Bank.
A business credit line is a flexible financial tool that can help a small business grow and keep you in control. So even if you don’t have an immediate need for a credit line, it’s handy to have in your hip pocket if business conditions change. Establishing the revolving credit line is cheap, you only pay interest on what you borrow and you can use the line for almost anything.
Here are few things a small business line of credit can be used for:
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1. Remodel, expand or upgrade your store, offices or other facilities.
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2. Buy new computers, servers, office technology or other equipment.
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3. Purchase extra inventory for upcoming promotions or seasonal spikes.
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4. Launch a new online marketing campaign.
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5. Create a new product prototype, pursue a promising business opportunity.
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6. Cover unexpected expenses.
Banks are still a good place to look for credit lines. Sure, bankers are being more tight-fisted these days, but they do have money to lend – especially for established businesses – and credit lines are one way they are doing it. Wells Fargo, for example, offers small business credit lines up to $100,000 that you can apply for online, even if you’re not a current customer.
Credit lines are also appealing because of their low costs. Interest rates will vary with prevailing market rates, but many lenders allow you to tap the line – via paper check writing, online, check card or other method – for no fee. However, you can expect to pay a modest fee to open the account once you’ve been approved.
Wells Fargo, for example, charges $150 for lines under $25,000 and $250 for larger lines. Any annual fee is often waived for the first year, and may run $100-$150 annually thereafter.
You should also ask if the lender offers some kind of interest rate protection or lock-in feature to protect you against rising rates in the future. Some lenders will let you lock in an interest rate on your business line of credit for a year.
Beware of using a credit line for cash advances however, as many banks charge a cash advance fee that can run 3% or more.
