Running a business can be an exciting endeavor, however, it may come with its share of challenges as well. One of these challenges is often finding the right way to fund your small business. Even though finding the right way to finance your business may feel stressful at times, the reality is that it can be easy to find the right path for you with a little research.

What Is a Line of Credit?

A line of credit is a type of loan that is also a revolving line of credit, similar to the way that a credit card is. With business lines of credit you are allowed to withdraw funds up to a specified, pre-determined amount. You can withdraw as little or as much as you need to, and interest often does not start to ecru until you have begun to withdraw funds. Additionally, when it comes to these kinds of credit lines, there are two main types that are offered. One is a secured line of credit, which involves some kind of collateral, and the other kind is an unsecured line of credit, which does not require collateral. Unsecured lines tend to be more desirable for borrowers, but may be somewhat more difficult to obtain than a secured line when you are just starting out.

How Does a Line of Credit Compare to Other Kinds of Loans?

Although a line of credit is a common option for small businesses, some may opt for a traditional loan instead. Traditional loans may take longer to obtain, and differ from lines of credit in that they are typically offered in one lump sum, which you will then have to make regular monthly payments on over time. While this may be beneficial for some small businesses, for many businesses that are just getting started out, a large, regular monthly payment may not be good for their cash flow. With a line of credit, you can borrow as much or as little as you need, and can help to ensure that you don’t have to take more money than what you can handle paying back at a given time.

The Bottom Line

Starting a small business can be exciting, however, it may come with its share of challenges, too. One of these is often finding the best way to fund your developing business.

That doesn’t mean, though, that you should necessarily feel discouraged. With a little research, it can be easy to find the right path for you.