We are a full-service business financing firm with consultants
that specialize in Business Lines of Credit.

What are Business Lines of Credit?

Business Lines of Credit are a predetermined pool of debt capital provided by a bank or non-bank lender, that a business can borrow from when needed and paid back later.

Business Lines of Credit can be open for either a set term typically a year or until closed by the lender or the Business. Unlike Term Loans, which are lump sums funded to the Business all at

once, with monthly payments that reflect the full balance with interest. With a Business Lines of Credit, companies can draw down only a specific amount of funds as needed. This means that the company’s monthly payments are only for the amount of capital outstanding at the moment vs. the paying debt and interest payments on the total loan funded amount.

The payments are based on the current outstanding balance of the Line and, therefore, can be paused at times, most lenders, Business Lines of Credit may come with either a monthly service fee for the Line or a drawdown fee that is a set percentage of every withdrawal.

Business Lines of Credit can be open for either a set term typically a year or
until closed by the lender or the Business.

What are the companies that can use a Business Lines of Credit?

A Business Line of Credit has so many universal short term, and long term uses that just about any for-profit company could benefit from utilizing a Business Credit Line to fulfill any capital needs. The most common industries that use them are including, but not limited to:

1- Bar & Restaurant Industry

2- Retail Industry

3- Construction and Sub-Contractor industry

4- Transportation Industry

5- Medical Industry

6- Wholesale and Distribution Industry

7- Manufacturing Industry

What are the two main types of Business Credit Lines we focus on are:

A Non-Revolving Business Line of Credit

Revolving Business Line of Credit

What is a Revolving Business Line of Credit?

A Revolving Business Line of Credit is a pool of debt capital that is provided by a bank or non-bank lender that a company can utilize as a source of financing capital. The lender provides access to funds that the company can use as needed, like a flexible, open-ended loan. A Revolving Business Line of Credit is often considered to be a type of an open-end credit account. Meaning an arrangement that allows borrowers to use the approved

amount of capital, repay it and reuse it again when needed in a virtually never-ending, revolving cycle.

A Revolving Business Line of Credit works very similarly to a credit card. Once the lender approves an application and grants the company a maximum borrowing limit, which the company can use to make purchases at any time and (usually) on any goods.

Since Revolving Business Lines of Credit are not funded all at once like term loans, but instead the pool of capital is made available for the company to use in increments as needed. There is no set monthly payment with revolving credit accounts.

The payments will be based on the amount of the Line of Credit outstanding at the moment. When payments are made on a Revolving Business Line of Credit, those funds become available for borrowing again. The credit limit may be used repeatedly as long as you do not exceed the maximum.

Most lenders also will allow the company to repay the full balance early to save on interest costs. Revolving Business Lines of Credit with lower credit limits are typically unsecured, which means collateral such as real estate or inventory is not required.
Line of credit borrowing limits can range from $1,000 to $300,000.

Many companies use Revolving Business Lines of Credit to finance capital expansion or as a safeguard in the event of cash flow problems.

If the company makes regular, consistent payments on a Revolving Business Line of Credit account, plus, the company’s revenues and profits merit the increase. The lender may agree to increase your maximum credit limit—again, like a credit card.

Revolving Business Credit Lines are typically used by companies to meet short term or recurring needs like purchases like inventory, supplies, or balancing operating expenses Meaning the company could use the funds, up to the full approved amount, then repay what was used to make the funds available again. Term loans, on the other hand, or Non-Revolving Business Lines of Credit, do not have this feature.

With a Revolving Business Lines of Credit, borrowers are allowed to return all or part of the amount of the Line outstanding at the moment. Thus lowering the number of payments and interest based on a reduced balance or pausing them if the Line is entirely replenished

if the borrower chooses to do so.

Since Business Lines of Credit come with flexible and fluctuating payment periods compared to working capital funding options, a companies financials and credit score are more important

Although some lenders typically non-bank lenders may provide start-ups with access to a Business Line of Credit, the majority of lenders, I will prefer to give a line to an established company. Most lenders will typically extend access to a non-revolving business line of credit only to companies that have been functioning for a minimum of three years. Collateral may or may not be required depending on if the Line was secured or unsecured.

Most lenders will base the approved borrowing limit of the Revolving Business Line of Credit mainly on the company’s revenues and financial ratios. The more a company does in revenue, the more the company stands to be qualified to borrow. On top of the revenues, lenders will also look at the company’s financial ratios based on the company’s most recent years financial statements. These documents will be required to verify that the company is reporting positive cash-flow ratios and determine how much debt service the company could maintain.

In order to qualify for a Business Line of Credit the vast majority of companies need to have been operating their company for a minimum of 3 years under the current Tax ID/EIN number with a minimum of 1 year of reported profitability for the most recent business year. 

Business Line, a Business must have revenues and must be profitable. Lenders consider your revenues as their principal means of payment. Therefore, your revenues and profitability must justify the size of the Line of credit. In order to qualify for this business financing product companies are going to need to provide a minimum of 2 most recent years of financial statements, tax returns, and a minimum of 6 mos to 1 year of the most recent business bank statements, will be requested to validate the company meets this criteria.

The company must be engaged in, or propose to do business in, the U.S. 

The companies owners may need to have a reasonable equity already or be ready to invest to build one up prior to funding. 

Moreover, the principals and the business have a good credit score with no tax liens or judgment issues. 

The owner/principals and the company itself must both have good credit scores

Most lenders also evaluate business owners individually to ensure that they are reasonable credit risks. They are running the company, so assessing their experience and other factors is essential. As part of their underwriting process, lenders will inspect the personal credit of the business owner(s), majority shareholders, all personal guarantors.

Most Lenders will also review the owner’s past professional expertise to assess your ability to operate the company within its current industry.

Whether there is a personal guarantee or not, almost all lenders for a Business Line of Credit will at least want a corporate assurance, meaning that the company guarantees repayment. If the company is a subsidiary of a larger company, lenders usually require that the parent company offer a guarantee as well.

Lastly, the lenders will usually run a personal background check to determine if there are any potential issues, such as past criminal behavior, that could affect their decision to give you a business loan. Most lenders will also look into the history of the actual company that is applying for financing. If the lender requires a personal guarantee, they may also review the owner’s assets. This review allows the lender to verify both the existence and market value of the assets in case of a default or any negative issues in the future.

Business Lines of Credit typically have lending covenants. Covenants are the rules that your company must follow to keep the Line of Credit active. Defaulting on a contract can result in extra fees and could lead to your Line being terminated by the lender. Each bank or non-bank lender has its own set of agreements. The most common Business Line of Credit covenants that most lenders will:

  • Comply with financial ratios agreed upon with the lender at the onset of funding
  • Maintain a net worth for the company and or it’s owners
  • Maintain a certain level of liquidity on the books at all times.
  • Not exceed a certain level of debt ratios in other areas of the company
  • Repay the Line in full periodically (e.g., once a year)
  • Agree to a personal guarantee, a fiduciary guarantee of performance, or confession of judgment
  • Advise the lender of any material changes in the company that may have an adverse effect

PARTNERSHIP YOU CAN RELY ON

Our goal is to be our client's trusted business financing partner from inception to the day they sell their business.

SEASONED BUSINESS CONSULTANTS

TGRP Business Consultants are here to offer our clients all of their years of experience in providing capital to companies to grow and expand.

What is a Non-Revolving Business Line Of Credit?

A Non-Revolving Business Line of Credit (LOC) is a Line or pool or capital from a bank or non-bank lender with a fixed borrowing limit that a company can draw down from. A company can draw down capital off the Line as needed or until the path reaches the ceiling. Since the Line does not have to be drawn down at once, the monthly debt payments on a non-revolving business line of credit reflect only the amount of capital outstanding at the time. A Non-Revolving Business Line of Credit does not replenish after payments are made. Once you pay off the Line of Credit in full, the account is closed and cannot be used again.

Business Credit Lines can either be unsecured or secured

Once the set borrowing limit of a Non-Revolving Business Line of Credit is established by a bank or non-bank lender, the funds are available for use whenever the company’s needs arise. Either the company can make large incremental draws, or as many draws as needed up until the Line hits the set borrowing limit.

Regardless of the size of the Line, once a company makes a draw. That portion of the Line is no longer available, but the company only has to make payments (principal, interest, and fees) on the amount of the Line outstanding at the time. The company can keep drawing down on the Line until the borrowing limit is reached.

The payments will always reflect the amount unpaid at the time. Once the company has drawn the remaining balance, the lender will close out the Non-Revolving Business Line of Credit. If additional funds are needed after the total balance on the Line is paid off, then the company would have to apply for a new Non-Revolving Business Line of Credit or other financial products.

Although a Non-Revolving Business Line of Credit does not replenish as payments are made, and once the final payments are received, the Line will close out. A non-revolving line of credit is still quite a flexible capital financing tool. 

Any company that has any short term or periodic needs for working capital can benefit from a Non-Revolving Business Line of credit.

A Non-Revolving Business Line of Credit can be used for a variety of reasons, including but not limited to hiring and training new staff, purchasing additional inventory for the right season, or using the Line to fill in revenue gaps whenever needed.

Any company maintains discretion as to when the capital that they borrow is deployed.

Although non-revolving lines closeout after they are maxed out, lenders often provide higher borrowing limits approval amounts versus revolving business lines of initial credit approval amounts.

Non-Revolving Business Lines of Credit tend to have better payment terms as the borrowing time is limited (a.k.a. not indefinite) but without a set duration as to when the debt is paid off. This does tend to make it easier to manage the payments and, thus, the debt risk. Since the payment terms are typically not set but based on the balance withdrawn, the company can make a small payment towards the Line, pay off in large chunks or pay it off ultimately. They are thus providing the borrowing company some very flexible payback options.

Non-Revolving Business Lines of Credit tend to come with lower interest rates in comparison to their revolving Line of credit counterparts.

A Non-Revolving Business Line of Credit may be a way for companies to help build up their Commercial Credit Score by maintaining the Line of Credit in good standing. Most, if not all, banks and non-bank lenders should report the company’s payment history for the Line. Having a good payment history on any credit product that is published by the lenders could help boost a company’s commercial credit scores.

This could lead to better loan terms and funding options if the company were to pursue future backing. A lot of Commercial Credit Experts suggest that companies should start a modest line of credit and pay off the debt fast as a way to structure a credit profile. To provide the company with access to bigger and better business financing products down the road.

Since Business Lines of Credit come with flexible and fluctuating payment periods compared to working capital funding options, a companies financials and credit score are more important

Although some lenders typically non-bank lenders may provide start-ups with access to a Business Line of Credit, the majority of lenders, I will prefer to give a line to an established company. Most lenders will typically extend access to a non-revolving business line of credit only to companies that have been functioning for a minimum of three years. Collateral may or may not be required depending on if the Line was secured or unsecured.

Most lenders will base the approved borrowing limit of the Revolving Business Line of Credit mainly on the company’s revenues and financial ratios. The more a company does in revenue, the more the company stands to be qualified to borrow. On top of the revenues, lenders will also look at the company’s financial ratios based on the company’s most recent years financial statements. These documents will be required to verify that the company is reporting positive cash-flow ratios and determine how much debt service the company could maintain.

In order to qualify for a Business Line of Credit the vast majority of companies need to have been operating their company for a minimum of 3 years under the current Tax ID/EIN number with a minimum of 1 year of reported profitability for the most recent business year. 

Business Line, a Business must have revenues and must be profitable. Lenders consider your revenues as their principal means of payment. Therefore, your revenues and profitability must justify the size of the Line of credit. In order to qualify for this business financing product companies are going to need to provide a minimum of 2 most recent years of financial statements, tax returns, and a minimum of 6 mos to 1 year of the most recent business bank statements, will be requested to validate the company meets this criteria.

The company must be engaged in, or propose to do business in, the U.S. 

The companies owners may need to have a reasonable equity already or be ready to invest to build one up prior to funding. 

Moreover, the principals and the business have a good credit score with no tax liens or judgment issues. 

The owner/principals and the company itself must both have good credit scores

Most lenders also evaluate business owners individually to ensure that they are reasonable credit risks. They are running the company, so assessing their experience and other factors is essential. As part of their underwriting process, lenders will inspect the personal credit of the business owner(s), majority shareholders, all personal guarantors.

Most Lenders will also review the owner’s past professional expertise to assess your ability to operate the company within its current industry.

Whether there is a personal guarantee or not, almost all lenders for a Business Line of Credit will at least want a corporate assurance, meaning that the company guarantees repayment. If the company is a subsidiary of a larger company, lenders usually require that the parent company offer a guarantee as well.

Lastly, the lenders will usually run a personal background check to determine if there are any potential issues, such as past criminal behavior, that could affect their decision to give you a business loan. Most lenders will also look into the history of the actual company that is applying for financing. If the lender requires a personal guarantee, they may also review the owner’s assets. This review allows the lender to verify both the existence and market value of the assets in case of a default or any negative issues in the future.

Business Lines of Credit typically have lending covenants. Covenants are the rules that your company must follow to keep the Line of Credit active. Defaulting on a contract can result in extra fees and could lead to your Line being terminated by the lender. Each bank or non-bank lender has its own set of agreements. The most common Business Line of Credit covenants that most lenders will:

  • Comply with financial ratios agreed upon with the lender at the onset of funding
  • Maintain a net worth for the company and or it’s owners
  • Maintain a certain level of liquidity on the books at all times.
  • Not exceed a certain level of debt ratios in other areas of the company
  • Repay the Line in full periodically (e.g., once a year)
  • Agree to a personal guarantee, a fiduciary guarantee of performance, or confession of judgment
  • Advise the lender of any material changes in the company that may have an adverse effect

COMPETITIVE TERMS

We have custom-tailored options to meet a company's specific needs. TGRP works diligently to provide each client with funding terms that fit their goals.

EXPERT SERVICE

We pride ourselves on going the extra mile for every client that we work with and excel at delivering the capital they desire to grow their business.

What is the difference between a Secured vs. an Unsecured Business Line of Credit?

A secured Business Line of Credit is a line in which the borrower puts up collateral as a security deposit on the Line of Credit. In contrast to a secured line, an unsecured business The Line of credit does not require collateral assets.

Collateral: (assets that the lender can sell if you default on the debt). For example, putting up property as a form of collateral is common, but this could also be other items owned by the Business, such as equipment or inventory.

A Non-Revolving Business Line of Credit is typically offered as unsecured debt, which means you do not need to put up collateral.

 Many unsecured Business Lines of Credit, whether Revolving or Non-Revolving, are available for sums ranging from $10,000 to $100,000 and can sometimes come with a variable interest rate.

Unsecured lines of credit are more expensive because the lender assumes a higher risk. Revolving Business Lines of Credit typically are secured as well for Non-Revolving Business Lines of Credit for greater than $100,000, may be required to secure the non-revolving business line of credit with a blanket lien on the company’s assets or a certificate of deposit.

We here at Troy Business Group are a Full-Service Business Financing firm
that specializes in providing clients with access to a Business Line of Credit.

Standard Interest Rates or Cost

Prime + or Libor +

Typical Underwriting TimeLine

3-5 Business days

Available Capital Limit

Up to $350k per Entity.

Average Term Limits

3-5 Days

In closing, Companies have capital needs to arise from time to time or periodically each year, like during a specific season. Whether it is to quickly hire staff, change over inventory, make quick improvements to the facility, or even roll out a new marketing campaign.

Companies at times will have needs whereby the owners want the flexibility to draw down funds only as needed but still have the capital in the war chest as needed.  Troy Business Group has a team of seasoned Business Financing Consultants that specialize in providing clients with access to both Revolving and Non-Revolving Business Lines of Credit.

Please apply online, email us for an appointment, or call us today.  Our team is committed to helping your business grow with a Business Line of Credit and will guide you through the loan process each step of the way.

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