How Long Does a Business Line of Credit Last

(July 2024)

How Long Does a Business Line of Credit Last

In This Article

Are you planning to get a business line of credit for your business but don’t know how long it can last? As a business person, one of the most distressing things to face is a lack of cash flow to fund your business or to expand it.

A business line of credit is one of the most viable and ideal ways of raising regular capital to run business expenses and bridge gaps in cash flow. You need to know how long the business line of credit lasts to properly factor it into your business.

Read on to learn more.
To Know How Long a Business Line of Credit Lasts:

  1. What a Business Line of Credit Is
  2. How to Apply (and Get Approved) for a Business Line of Credit
  3. How Long Does a Business Line of Credit Last (Validity Period)
  4. What Affects the Initial Validity Period of a Business Line of Credit
  5. How to Extend the Validity Period of a Business Line of Credit
  6. What Factors Can Shorten the Validity Period of a Business Line of Credit
  7. Pro Tips:
  • What to Do if a Lender Shortens the Validity Period of an Existing Business Line of Credit
  • What to Do if a Lender Cancels an Existing Business Line of Credit
  • What to Do if a Lender Declines Your Application for a Business Line of Credit

1. What a Business Line of Credit Is

To know how long a business line of credit can last, familiarize yourself with the concept of a business line of credit. Understand that a business line of credit is the type of business loan where you don’t get a lump sum but you only draw out the amount you need at a particular period and the interest chargeable on it is just on the amount you draw from the account.

A business line of credit is revolving because—after you pay back the money—you can keep using the credit line. To make the business line of credit last and always available for your business, you should pay all the amount you draw from the line of credit and make the money available for you to draw again; it keeps revolving if you keep paying it back.

2. How to Apply (And Get Approved) for a Business Line of Credit

To know how long a business line of credit lasts, consider how to apply for and get approval for a business line of credit. There are standard parameters that most lenders follow before granting a business line of credit; consider whether you meet them before considering the specifics of different lenders.

To be in the good shape to apply for a business line of credit, check your credit score from scoring agencies to be sure of your creditworthiness. Lenders naturally require a credit score of about 600 and above to consider granting a business line of credit.

Lenders also consider your annual revenue to be sure you meet the minimum requirement for the grant of a business line of credit.

One of the major points of consideration is the business history of the company applying for a business line of credit; a business younger than two years stands a low chance of getting approval for a business line of credit.

Get your documents and requirements ready to apply; identify the lender with all the requirements you want and gather all the documents they require for your application. Most lenders will require your personal and business tax returns, business Licenses, Articles of Incorporation, personal and business bank statements, business plan, and building lease.

3. How Long Does a Business Line of Credit Last (Validity Period)

To know how long a business line of credit lasts, determine the validity period of the business line you are using. The validity period of a business line of credit depends on whether the line is a revolving line or non-revolving.

With a revolving line, the line of credit continues to be available as long as you keep repaying in line with the terms of the lenders. However, a non-revolving line closes as soon as you repay the amount you draw from the line of credit.

Some lenders may also set a specific validity window for a business line of credit—five years, for example—and review the funding program periodically before renewing it (or discontinuing it).

4. What Affects the Initial Validity Period of a Business Line of Credit

To understand how long the business line of credit lasts, know what affects the initial validity period of a business line of credit.

To properly explore various things that affect a business line of credit, know that things like interest rates, the financial stability of the borrower, the general state of the economy, etc. have a high tendency to affect the initial validity period.

Understand that the total credit limit from which you can draw goes a long way to determining how long and for what purpose you can use the business line of credit. Determine whether the lender has a non-utilization fee; and whether there are any hidden fees without clear and transparent information.

5. How to Extend the Validity Period of a Business Line of Credit

To properly use your business line of credit, have deep knowledge of how to extend the validity period of a business line of credit. Know exactly the things you have to do to make the line of credit continue.

Go for a revolving line of credit to stand a chance of keeping the line open. Understand that the validity period of a business line of credit continues especially if it is a revolving line of credit until you exceed the limit. Always keep a low credit utilization.

Keep your line of credit alive by continuing to pay off the balance of the amount you draw from the line. Whenever you make a purchase, that amount is taken from your total credit limit, and whenever you make a payment, your credit limit goes up.

6. What Factors Can Shorten the Validity Period of a Business Line of Credit

To know how long a business line of credit lasts, consider what factors can shorten the validity period of a business line of credit. Note that if a business line of credit fulfils the purpose for which you obtained it, you don’t have to extend it or wait for the validity period.

Moreover, be aware that not fulfilling your obligations under the line of credit terms can reduce the validity of the business line of credit even if it’s a revolving line.

A lender also may decide—for several reasons—to shorten the validity period of a business line of credit.

7. Pro Tips:

What to Do If a Lender Shortens the Validity Period of an Existing Business Line of Credit

Know that the market can be unpredictable and the lender can cut the validity period of your business line of credit at any time. Therefore, don’t let your business depend on the line of credit; this can be a critical impediment.

What to Do If a Lender Cancels an Existing Business Line of Credit

Understand that as lenders can shorten the validity period of an existing business line of credit, they can also cancel them suddenly. When the lender shortens the validity period, prepare your business to scale back to reduce the loss of the credit while you replace the line of credit.

What to Do If a Lender Declines Your Application for a Business Line of Credit

When a lender declined your application for a business line of credit, it’s time for you to reflect on the possible clauses that trigger the declination. Check through the major checklists for business lines of a credit application to verify whether your credit score is good enough.

Your credit history also matters. Find out if you have an existing business line of credit you no longer remember or if there is any information you submit on the line of a credit application that is false. Detect whatever the issue is and try again.

Conclusion

To know how long a business line of credit lasts, understand what a business line of credit is and how to apply for it and get approval.

Determine how long a business line of credit lasts through the validity period and decipher what usually affects the initial validity period of a business line of credit.

Know how to extend the validity period of a business line of credit and the factors that can shorten the validity period of a business line of credit.

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