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Category: Business Lending

Lines of Credit

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What is a business line of credit?
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What is a business line of credit?

A business line of credit is similar to personal lines of credit, such as credit cards or home equity lines of credit. You have access to a specific amount of financing—say, $50,000—but you don’t make payments or incur any interest until you tap into the funds.

Lines of credit can be unsecured or secured (typically by inventory or receivables). They are often referred to as “revolving,” which means you can tap into them again and again. For instance, if you have a $50,000 line of credit and take out $25,000, you still have access to the remaining $25,000. If you pay that $25,000 back down to $0, you still have access to the entire $50,000 without reapplying.

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Why would a business pursue a line of credit over a standard term loan?
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Why would a business pursue a line of credit over a standard term loan?

This decision depends on your personal situation and goals for your loved ones. Through an individual meeting, a MutualFinancial representative will help you determine how much life insurance you need based on current debt and your desire to provide items such as a steady income or college funds for loved ones.


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What do businesses typically use lines of credit for?
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What do businesses typically use lines of credit for?

Lines are usually used for one of two reasons:

Operating Lines of Credit 
Operating lines of credit are used to help bridge the timing between when a receivable is collected or inventory is turned into cash and the need to pay an account payable. Having a line of credit in this situation can sometimes help a company get better terms on the purchase of assets by buying in larger quantities or paying for them faster than if the inventory was eventually turned into cash.

CAPEX Lines of Credit
Sometimes a company knows that it will need to purchase additional pieces of equipment over a stated period of time (typically less than one year). In that situation, the bank will set up a line of credit specifically targeted at the acquisition of that equipment with the intent to then term out the line of credit after all the equipment is purchased an put into operations. This allows for a company to not worry about how it will acquire the equipment, rather, it can work through a plan to implement that equipment in the business without worrying about how it will pay for such equipment.

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Does it cost anything to talk through business line of credit options with a MutualBank commercial lender?
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Does it cost anything to talk through business line of credit options with a MutualBank commercial lender?

As with any Commercial/Business loan with MutualBank, there is no cost to discuss options and possibilities with a MutualBank team member.

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Are there fees to submit a line of credit application for review?
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Are there fees to submit a line of credit application for review?

As with any Commercial/Business loan, there is no fee to submit an application for review.

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Are there fees or other costs with a business line of credit after it has been approved aside from monthly payments?
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Are there fees or other costs with a business line of credit after it has been approved aside from monthly payments?

Depending on the type of collateral, there may be additional costs outside of the normal Loan Origination Fee.

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After I submit my business line of credit application, how quickly can I expect to hear back regarding its approval or denial?
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After I submit my business line of credit application, how quickly can I expect to hear back regarding its approval or denial?

It depends. If the loan is large enough to be elevated to an approval process that includes our board of directors, it will take longer than one that only requires one or two signatures. However, regardless of the size of the loan, our goal is to make sure you know what terms and conditions the bank believes it can provide as quickly as possible so that all parties can proceed with completing whatever project it is that the client may want to start.

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Is collateral required for a business line of credit?
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Is collateral required for a business line of credit?

Typically, yes; however, the bank can provide unsecured lines of credit depending on the strength of the borrower and/or guarantor.

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After a business line of credit application is approved, how quickly can I use the line of credit?
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After a business line of credit application is approved, how quickly can I use the line of credit?

Once loan documents have been signed, the line of credit can be accessed immediately.

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What types of collateral can typically be used to secure a business line of credit?
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What types of collateral can typically be used to secure a business line of credit?
  • Inventory
  • Accounts Receivable
  • Fixed Assets
  • Real Estate
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These questions and answers are provided for general information only and may not be completely accurate in every situation. The information provided is not legally binding on MutualBank or any of its affiliates or subsidiaries. For assistance with specific questions regarding your account(s), please contact us.

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