Five Types of Line of Credit Loans
The following are five types that can help a small business grow.
Short-Term LOC Loans
These are analogous to the short term loans in terms of APR, interest rate, loan amount, revenue requirements, and credit score requirements.
Medium-Term LOC Loans
These have higher maximum amounts, lower APRs, and the option to cover more costs such as inventory, repairs, payroll, bills, etc.
Bank LOC Loans
These are financially more sensible, but require you to qualify on a variety of relatively stringent factors. These bring the highest amounts and the lowest interest rates, but you really need to find the answer to the question, “What banks offer a line of credit?”
Equipment-Backed LOC Loans
This ties the money you borrow to specific equipment, which serves as what is called the collateral. The lender bets on the use of this equipment helping you repay the amount you owe them.
Invoice-Backed LOC Loans
Your accounts receivable are placed as collateral, and you make payments to an account managed by the lender. Most of your invoices get paid off this way, leaving you with working capital that can be put to whatever use you intend for it.