Line of credit vs. loan: Which is the right choice for your business?
Zoey Van Jones of Zoey Van Jones Brow Studio learns which loan options are right for her small business.
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If you don't mind, I can tell you the difference in that line of credit and a business loan.
ZOEY VAN JONES:
A line of credit is revolving — you can decide to pay whether it's the interest that you're paying on it or pay it in full — whereas you have the business loan that's fully amortized.
What does that mean?
"Fully amortized" meaning that you take out a $100,000 loan, and you want to pay it off in five years. It's going to be amortized, so you're paying principal and interest so at the end of the five years, it's completely gone. Whereas your revolving line — you're always able to leverage it as long as you pay it down.
A line of credit would be beneficial to all business customers because it helps to manage and supplement cash flow, and it bridges the gap during cash flow fluctuations.
Thus far, we've just internally funded, and so we had to keep really managing the cash flow and spending money when we are able to spend money.
See, and the line of credit will help bridge that gap.
VAN JONES (OFFSCREEN):
Christine is terrific. She really put my mind at ease knowing that there was lots of different options. With all the expansion that's going on right now, that will be super helpful.
That's just great to feel confident that I have this crew of people helping me.