Business Loan FAQs
Plain answers to the questions we get most often about business loans and lines of credit.
What is a business line of credit?
A business line of credit is a revolving credit facility with a set limit — similar to a credit card but typically with a much higher limit and lower interest rate. You draw funds as needed, repay them, and draw again. You only pay interest on the amount you have outstanding at any given time. Lines of credit are ideal for managing cash flow, covering payroll gaps, or taking advantage of business opportunities as they arise.
What is the difference between a business term loan and a line of credit?
A term loan gives you all the money at once and you repay it over a fixed schedule — same payment amount, same dates, until the loan is paid off. A line of credit is flexible: you draw from it when you need to, repay it when cash is available, and the line resets so you can draw again. Term loans are better for one-time large purchases. Lines of credit are better for ongoing, fluctuating working capital needs.
What is invoice factoring in simple terms?
Invoice factoring means selling your unpaid customer invoices to a third party at a small discount in exchange for immediate cash. If you have a client who owes you $80,000 with net-60 terms, you do not have to wait two months for that money. A factoring company buys the invoice and advances you 80-90% immediately. They collect directly from your client when the invoice is due. You get your cash now, minus a small factoring fee.
What is purchase order financing?
Purchase order financing helps businesses fulfill large orders when they do not have the cash on hand to pay suppliers upfront. A financing company pays your supplier directly so you can fill the order. When your customer pays you, you repay the financing plus fees. This is especially useful for product-based businesses landing larger contracts than they are currently set up to finance.
How fast can I get approved for a business loan?
Term loan and credit line approvals typically take three to seven business days from when we have a complete file. Funding follows within one to two weeks of signing. Invoice factoring and purchase order financing can sometimes be arranged within 48 to 72 hours once we verify the relevant documents. Speed depends on how complete your file is and the lender's processing time.
What credit score do I need for a business loan?
Good to excellent personal credit is preferred — most lenders want to see 650 or higher for a competitive approval. Some products have lower thresholds. Invoice factoring and purchase order financing rely more heavily on your customer's creditworthiness than your own. If your credit score is under 650, it is worth talking to us before assuming you do not qualify.
Do I need collateral for a business loan?
It depends on the product and amount. Smaller credit lines and some term loans can be approved on an unsecured basis for qualified borrowers. Larger loans often require collateral or at minimum a personal guarantee. Equipment loans use the equipment itself as collateral. Invoice factoring uses the receivables. We will be upfront about what is required before you apply.
Can I get a business loan if my company is less than a year old?
It is more challenging for businesses under one year to qualify for traditional term loans and credit lines, but not impossible. Invoice factoring is available to newer businesses whose customers have strong credit. Some specialty lenders look at 6+ months of operation for smaller credit lines. If you are pre-revenue or brand new, our fast business funding or credit building programs may be a better starting point.
What is APR and why does it matter?
APR stands for annual percentage rate — it is the total annual cost of a loan expressed as a percentage, including interest and any fees. It is the most standardized way to compare loan costs. A loan with a 7% interest rate but high origination fees may have a higher APR than one with a 9% rate and no fees. When comparing offers, always look at the APR, not just the interest rate.
Can I pay off a business loan early?
Many lenders allow early payoff, but some charge a prepayment penalty — typically a percentage of the remaining balance or several months of interest. We ask about prepayment terms when we shop your file, and we will disclose this in every offer so you know what you are agreeing to before you sign.
Still have questions?
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