Ask Agard

**Every month I answer a Real Estate or Entrepreneurship question from one of my clients. Questions vary from what to do when buying or selling a property, to how to effectively operate a business.

Q: What is a Business Line of Credit, and how does it work?

A: As business owners, we are always looking for ways to expand our working capital and to have reserves on hand for emergency situations. An alternative to taking out a business loan is to acquire a business line of credit for your company.

Small business lines of credit is good for short term financing. Unlike business loans, you pay back what you use. If you take out a business line of credit for $50,000 and you use $10,000 for marketing and promotions, you only have to pay principal and interest on the $10,000. Similar to revolving credit on a charge card, lines of credit are open term; meaning you only pay back what you use and there is no set time on terms.

There are many lines of credit that are unsecured, meaning that you do not have to use collateral such as real estate. Many lenders still have streamlined programs that require very little documentation, no tax returns, but the guarantor must have a very high credit score. Because it is unsecured, the interest rates are a little bit higher than a business loan. Business loans require more paperwork so the risk is lower for the lender.

Most lenders provide lines of credit up to $50,000. It is also wise to consult a business broker who can find out the best places to apply for a line of credit.