Line of Credit / Overdraft
Never get caught in an emergency. With a line of credit, you can be assured that you have sufficient cash flow to withstand short term liquidity shocks. Never be caught off guard with an order surge again.
What is the difference between a Line of Credit and a Business Loan ?
As the name suggest a line of credit is a facility that is made available to you within a period of time. This means that you have the option to tap on the facility as and when you may require. This is particularly useful when you are not able to ascertain a specific time and amount of funds required. The last thing you want is to sit on borrowed cash, paying interest while not making any use of the funds. A business loan on the other hand is drawndown straight after it is approved with the amount and tenor preset.
Line of Credit | Business Term Loan | |
|---|---|---|
Drawdown Period | Within 1 year | Immediately on Acceptance |
Amount | Flexible within approved limits
| Fixed on acceptance |
Tenor | Flexible within approved limits | Fixed on acceptance |
Fees and Interest | Starts only when
utilised | Immediately upon disbursement |
When is a Line of Credit useful?
Loan disbursement is typically the same as a business term loan which is unsecured with a maximum loan amount of up to 3x of your monthly cashflow. The key difference is in the flexibility of timing in disbursement. Below are some of the most popular reasons why you should consider having a line of credit. It is also to note that a business term loan and a line of credit are not mutually exclusive, you can have a business term loan and a line of credit for additional cushion when required.
- Sudden surge of orders – A cashline can provide the liquidity to help you fulfil short term spikes in order flows. The funds can help you hire new staff or purchase inventory.
- Delay in payment from buyer – A delay in payment from your buyer can cause short term liquidity shocks. Having a cashline can give you additional buffer for your cashflow.
- Equipment Replacement – A sudden need for a large ticket purchase can disrupt your vital operating cashflow. A cashline can help provide comfort to liquidity when an emergency happens.
How does it work?
Quite simply, once you draw down on your line of credit, it operates entirely like a business term loan. You will be required to pay interest and principle on a monthly basis through an equal repayment schedule. Here are some of the key terms you should take note:
Amount | Tenor | Interest Rate | Processing Fee |
|---|---|---|---|
Up to 3x monthly cashflow | Up to 12 months | 1% – 3% per month | 5% |
It is also important to note that while a credit line is pre-approved, there is no commitment from the lender to fully oblige to the drawdown when called upon. This means that there is a risk of the lender cancelling the line when required. Therefore, a line of credit should not be a replacement for a business term loan.
Why get your Line of Credit / Overdraft through Beez Rev?
A team that will support you
We have a dedicated team that will walk you through your entire loan process and help you do the market research you need.
We let lenders compete for your loan
Be ready to be spoilt for choice when we help you compare the best deals across all banks and non-banks so you only get the lowest interest rate and the highest cash out amount. Our rates are same as what the banks can offer or even better.
Frequently asked questions
Is there a processing fee involved in taking on a line of credit?
While there is no application fee. There is typically a fee involved when you make a drawdown which can range from 3-5% of the loan amount. Hence it makes more sense to have a longer tenor loan since you are paying the same amount on processing fee.
How fast is an application for a line of credit?
It takes roughly the same time as an unsecured business term loan which could be as fast as 2-3 working days.
How long is my credit line approved for?
Typically a credit line is available for 6-12 months upon approval and is subject to renewals after these periods. Some lenders might require certain documents like your latest bank statement prior to a drawdown.
What is the key difference between a line of credit and an unsecured business loan?
Unlike a unsecured business loan, a line of credit is a standby loan option and it does not incur interest cost or any fees unless a loan is drawdown. This means that it can be kept for emergency purposes. A total amount, max tenor and interest are predetermined.
What is the maximum amount you can get on a line of credit?
This is typically the same as an unsecured business loan which is typically up to S$200,000.