When is a business line of credit useful?

A business line of credit makes the most sense when you need to make multiple purchases in a short period of time. Since credit lines are revolving, you can keep making purchases as long as you pay down the balance. 

Can a line of credit improve my business credit score?

Yes, it can. Paying your credit line on time and maintaining a responsible balance builds up your credit score. 

What kind of fees do business lines of credit have?

Some business lines of credit will have origination fees just like loans. These are usually a very small percentage of the loan amount. Generally, though, the only “fee” you’ll pay is your interest rate. 

How is a business line of credit different from a business credit card?

The biggest difference between business lines of credit and business credit cards is the size of the credit line. While they both operate similarly, credit cards often have much smaller credit lines than business lines of credit. Credit cards are meant for smaller, day-to-day purchases rather than startup costs. 

Will I be penalized if I don’t use my business line of credit?

Nope, there’s no fee for letting your credit line stay open. That said, there’s no reason to open a line of credit if you don’t need it. 

About the Author

Christopher Murray

Christopher Murray

Personal Finance Expert

Christopher Murray is a professional personal finance and sustainability writer and editor who enjoys writing about everything from budgeting and saving to unique investing options like SRI and cryptocurrency.

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