Line of Credit

Line of Credit

July 15, 2020 by investor

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

Equity funding is just one source of funding for your startup. There are many others such as a line of credit.

A line of credit is a short-term loan from the bank to help smooth out cash-flow cycles.

Unlike a bank loan in which you receive an injection of funds, a line of credit lets you draw upon it when you need and pay it back when you can.  

The interest rate on a line of credit is substantially lower than credit cards and offer a higher borrowing limit than most credit cards.

However, the interest rates are often variable and not fixed.

A secured line of credit is backed by an asset, while an unsecured line of credit is not. An unsecured line of credit will come with a higher interest rate.

There are both personal and business lines of credit. Personal lines of credit are often secured by personal property.

For a business line of credit, the bank determines your credit limit based on the business assets and cash flow.

The bank determines the interest rate by adding the interest to a margin which is affected by your credit history, profitability, and business risk.

The line of credit is a useful tool for early-stage businesses to help with cash-flow issues. 


Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.


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Disclaimer:
Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.

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