The Benefits of a Commercial Line of Credit

June 26, 2023
The Benefits of a Commercial Line of Credit

There are several financing options for your business, including a commercial line of credit. It is ideal for covering recurring, specific, and short-term working capital operational needs, especially since you must repay them in 12 months or less.

The line of credit can also be tied to your business account, providing protection against checks with insufficient funds and unexpected expenses.

What is a line of credit1?

They are agreements to grant funds for a given purpose, up to a predetermined amount; the maximum limit is valid for the duration of the line, which is usually a revolving line of credit. Lines are activated at the customer’s request, are subject to credit approval, and require an annual review.

When should you apply for a line of credit?

A line of credit can be an option if your business needs to:

–     Increase its cash flow because you need capital to deal with sales fluctuations

–     Obtain advance inventory financing

–     Get additional capital to finance unexpected situations

–    Your business has seasonal sales

–     Cover a business financial gap

“To find out which credit alternative fits your needs, the first step is to talk to your Commercial Relations Officer or the manager at your preferred branch. During the interview, it will be determined which, among our different products, is best for your business according to the type of industry and financial structure, among other factors”, said Corina Camacho Peinado, manager at Popular’s Commercial Credit Division.

For example, you may need to buy office supplies or items to make meals you will sell in your food truck. There are several financing alternatives, one being a line of credit, but there’s also the option of applying for a commercial credit card. You will get personalized guidance from a Relationship Officer or the branch manager, based on your interview with them.

“There are lines for operational capital, for construction, and for certain specific short-term needs. There are secured lines of credit using mortgage collateral or some other collateral. In addition, as a preferred lender accredited by the United States Small Business Administration (SBA), we offer guaranteed line of credit options under different programs available from the agency,” Camacho Peinado added.

Types of lines of credit

The revolving line of credit may be tied to a business account. It offers, among other benefits:

  • Cash flow to cover expenses
  • Protection against checks with insufficient funds, late payments, and unexpected fees
  • Advances of automatic funds in the business account

The non-revolving line of credit allows you to borrow an amount for a certain period and has an expiration date. Once the funds are used, they are not available again because they were granted for a specific purpose, such as financing a construction contract or for service contracts with state and federal government, among others.

What you need to apply for financing

At Popular, you can apply online or at the branch of your choice. If you do it online, the business platform will ask you for information based on your answers. However, the key is interviewing with a Relationship Officer or a branch manager.

Regardless of the kind of financing for which you apply, try to have the following information of your business on hand:

  • Financial statements of the applying debtor and its principal, if applicable
  • Projections
  • Specific and complementary information that justifies why you are applying for financing, which may vary on a case-by-case basis
  • If this is a new relationship in the bank, you must have the business’s last three (3) account statements

For more information, please call our Commercial Support Center, contact your Relationship Officer, or visit the branch of your choice.

1 Any extension of credit, whether through credit cards, lines of credit or loans, is subject to credit approval. Certain conditions apply.

The contents of this article do not constitute legal, tax, accounting, financial or investment advice and is for informational purposes only.  The information provided in this article should be used only as a guide and not as a source of professional advice. Popular, Inc. (“Popular”), its subsidiaries and/or affiliates do not offer a warranty of the accuracy and applicability of its content for any particular purpose. The information contained herein is provided as of the date hereof and does not consider future changes. Popular, Inc., and/or its subsidiaries, affiliates, or related entities are not responsible for losses or damages, direct or indirect, that may result from the use of the information contained herein. All information provided in this article, or any other related topic should be confirmed and corroborated with your own advisor.