Get the Tata Capital App to apply for Loans & manage your account. Download Now

Blogs SUPPORT
Loans For You
Loans for Business
Investment
Insurance
Apply

Quick Links for loans

Quick Links for Insurance

Investment

Offers Quick Pay
Back

Equipment Finance

Avail Digital Equipment Loans
up to Rs. 1 Crore

  • Attractive ROIs
  • Customizable Loan tenure
Know More
Back

Equipment Leasing

Avail Leasing solutions
for all asset classes

  • Up to 100% financing
  • No additional collateral required
Know More
Back

New Commercial Vehicle Financing

  • First time user
  • Retail and strategic Clients
Know More
Back

Used Commercial Vehicle finance

  • Repurchase
  • Refinance
  • Top up
  • Balance Transfer
Know More
Menu  
 
Apply Now

Tata Capital > Blog > Loan for Business > Is a Business Line of Credit Right for Your Company?

Loan for Business

Is a Business Line of Credit Right for Your Company?

Is a Business Line of Credit Right for Your Company?

When it comes to running smooth business operations, funds are instrumental. However, seasonal slumps, delayed payments, and unexpected expenses can constrict your cash flow. In such circumstances, a line of credit or LOC can get you the working capital you need.

With a business LOC, you can fund urgent expenses and have a steady stream of credit, which you can borrow from any time you like. A business line of credit for new businessesis also helpful if you’re starting your venture and are unsure what kind of costs you will incur.

Before we evaluate whether a line of credit is right for your business, let’s look at how it works and its types.

What is a line of credit for businesses?

A business line of credit(LOC) works in the same way a loan does. You approach a lender, get the credit approved, and use the funds for business operations. However, there’s one key difference. The amount is disbursed as per your needs.

This means you can use the sanctioned amount in parts. Also, the lender will charge you interest only on the amount you withdrew and not the entire principal. And you only repay the amount you utilise.

Here, the lender does not designate a specific purpose or purchase for the credit, which means you can use the funds to manage cash flow better, cover intermittent expenses, or tend to your organisation’s short-term expenditure.

Additional Read: What is a Business Line of Credit & How Does it Work?

Types of lines of credit for businesses

Business LOCs are broadly classified into two types:

  • Secured: For this LOC, you need to pledge one of your assets as collateral while applying for credit. The lender will hold the collateral until you repay the loan for security. However, in exchange for security, you can qualify for relatively lower business loan interest rates.
  • Unsecured: Unsecured LOC doesn’t require you to offer collateral as a security.

Is a business LOC right for your business?

Business LOCs are an excellent choice for small businesses which can’t accurately predict their revenue and sales. Since you can borrow chunks from the sanctioned principal, you can request and use the amount as and when required. Business LOCs are also great if you’re looking to build up your credit score.

But it’s essential to keep in mind that these lines of credit usually have variable interest rates. This means, unlike loans, you cannot calculate the instalments and interest payable in advance. Also, untimely payments can ramp up the EMI size.

Here, you can choose a business loan if you have a specific purpose in mind, like purchasing equipment, cash flow management, financing inventory requirements, etc. Also, you can borrow a relatively higher amount with a loan and manage hefty expenses like business expansion or other long-term plans.  

Additional Read: Business Loan VS Lines of Credit: Everything You Need to Know

In summary

In a nutshell, a line of credit has both pros and cons, and the right financing choice depends on the unique requirements of your business.

If you are looking for multi-purpose business finance, choose Tata Capital! We offer flexible tenures, customisable EMI plans, and attractive interest rates.

Check your business loan eligibilityand apply today.

Apply Now

Give Your Business the Right Boost: Apply for a Business Loan Today

Apply now
Popular Searches
business idea udyogini scheme hsn code full form low investment business ideas top 10 most successful businesses to start transport business import export business in india mineral water plant cost collateral free loans
Disclaimer

Most Viewed Blogs

Trending Blogs

Calculator

Personal Loan EMI Calculator

Personal Loan EMI Calculator
Home Loan EMI Calculator

Home Loan EMI Calculator
Business Loan EMI Calculator

Business Loan EMI Calculator
Used Car Loan EMI Calculator

Used Car Loan EMI Calculator
Two Wheeler Loan EMI Calculator

Two Wheeler Loan EMI Calculator
Loan Against Securities Calculator

Loan Against Securities Calculator
Loan Against Property Calculator

Loan Against Property Calculator
More Tools
Our Subsidiaries
Our Other Websites

Useful Links and Resources

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download

Policies, Codes & Other Documents

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download

Tata Capital Solutions & Services

Uh oh, something went wrong

Please try again later.