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8 Differences Between Business Loans and Business Lines of Credit

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Wondering about the best financing options for your business? This presentation details 8 key differences between loans and lines of credit so you can make the right decision. RapidAdvance Offers …

Wondering about the best financing options for your business? This presentation details 8 key differences between loans and lines of credit so you can make the right decision. RapidAdvance Offers Fast, Flexible Small Business Financing & Resources that Promote Success! Find Out How We Can Help YOUR Business GROW and Prosper! Call Today: 877-GO-RAPID or Visit Us Online: http://www.rapidadvance.com/

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  • 1. 8 Differences Between Business Loans & Business Lines of Credit
  • 2. The first building block for managing a business is capital. Two popular financing options for businesses are loans and lines of credit. Which is best for you? This presentation goes over some of the differences, so you can make an informed decision.
  • 3.  One time vs. multiple uses  Payment options  The difference in the “whens”  Closing costs  Monthly payments  Long-term debt and short-term debt  Monthly costs
  • 4. -One Time vs. Multiple Uses  A line of credit can be used more than one time.  Business loans are used only once.
  • 5. - Payments Options  With a line of credit, you only make payments on the amount you have borrowed, so your payment is zero if your balance is zero.  When you have a traditional business loan you borrow the whole amount at once. This option sets you up with monthly payments that begin right away.
  • 6. -The Difference in the “Whens”  “When” you get a line of credit – This is something you acquire before you need it. It is generally not for a specific purpose.  “When” you get a loan – This is for a specific purpose and is only obtained when needed.
  • 7. - Closing Costs  A line of credit can have minimal to no closing costs.  A traditional loan can have closing costs that range from 3-7%, but there are exceptions to every rule.
  • 8. - Monthly Payments  Monthly payments are usually higher on traditional loans than they are for lines of credit.  For example: A traditional loan for the amount of $75,000 would have a monthly payment of $600- 1000/month more than if you owed the same amount on a line of credit. Line of Credit Loan • Payments reflect only the amount of money you’ve borrowed. If you have a zero balance, you don’t owe anything. • Payment on the full amount begins immediately, whether you’re using all the money or not • Repayment terms and periods are customized for your business. • Repayment terms and periods are fixed. You owe the same amount every month.
  • 9. - Long Term Debt or Short Term Debt  For short term purposes such as making payroll, marketing costs, or unexpected cash-flow issues, lines of credit are best. Although this is great for surprises, be careful not to exhaust your funds.  However using your credit line for revenue generating activities (RGA) is an ideal use for these funds. You’ll be able to justify new debt you’ve incurred because you have achieved success by growing your company and generating additional revenue.
  • 10. - Monthly Costs  With a line of credit, you have greater flexibility in what you pay on a monthly basis. You can draw only what you need, and then pay it down to lower your balance back to zero.  With a traditional loan, you would have to pay off the entire loan balance or refinance, which can carry additional costs.
  • 11. Summary With changes in guidelines, products, and lenders the world of small business lending can be delicate. Banks are approving less than 10% of small business loan applications these days, and owners are looking for alternative ways of funding their businesses in order to make them successful.
  • 12. Let RapidAdvance Help To learn more about how our business line of credit can help your business grow and prosper, visit us at RapidAdvance.com. You can also call us toll-free at 1-877-GO-RAPID to get a free quote on any of our other fast and flexible business financing solutions.