Business Line of Credit
Business Line of Credit features
Competitive interest rates
We offer competitive interest rates on secured and unsecured credit lines.
Approved amount
Approved amount for your business needs without the hassle of re-applying.
Repayment options
Repay the full amount or make minimum monthly payments on your credit line, which can be either blended principal plus interest or interest-only.
Pay interest on the amount used
Interest is calculated on the outstanding balance only.
Rolling available credit
After repaying your borrowed funds, your line of credit renews, allowing you to borrow again up to your available balance.
Letter of Credit option
A financial contract between a financial institution, its customer and a beneficiary. The letter of credit guarantees the beneficiary will be paid once the conditions of the letter of credit have been met.
Business Line of Credit: FAQs
A business line of credit in Canada is a financial option offered that provides businesses with access to a predetermined amount of funds. Unlike traditional term loans, which provide a lump sum upfront, a credit line allows small businesses to withdraw funds as needed, up to the specified credit limit. This arrangement offers flexibility, as small businesses can borrow and repay funds as their cash flow needs fluctuate. Interest is only charged on the amount borrowed and for the duration it’s outstanding. Businesses often use lines of credit to manage working capital, cover short-term expenses, seize opportunities, or finance inventory purchases.
Revolving credit is when a borrower is granted access to a specific amount of funds, known as a credit limit, which they can borrow, repay, and borrow again as needed. It’s called revolving because the available credit replenishes as payments are made, allowing the borrower to reuse the funds.
You can schedule an appointment with one of our business specialists using the UCU Book a Meeting feature on our website or by calling your local branch. Be prepared to provide detailed information about your business, including financial statements, tax returns and projections. UCU will also evaluate your business’s credit history and overall financial health as part of the application process for a business credit line.
Establish your business identity. Register your business and obtain a Business Number (BN) to create a separate financial footprint. Open a dedicated business bank account to keep your finances organized and demonstrate responsible management.
Build a positive payment history. Pay all invoices and bills on time, consider setting up automatic payments and negotiate favourable payment terms with suppliers whenever possible. Timely payments not only establish your creditworthiness but also free up cash flow for other needs.
Leverage existing credit tools. Apply for a business credit card and use it responsibly, paying your balance in full to avoid interest charges. Explore business loans or lines of credit, borrow only what you can comfortably repay and make timely payments to build a strong credit history.
A business line of credit offers flexibility, allowing you to access funds as needed up to a predetermined credit line limit. You only pay interest on the amount you use, making it a cost-effective option for managing short-term cash flow needs, covering unexpected expenses, or taking advantage of opportunities as they arise. The interest rates on lines of credit are variable, meaning they can fluctuate over time.
A business loan provides a lump sum of money upfront, which you repay over a fixed period with interest. This can be advantageous for financing larger investments or projects with defined costs and timelines. Business loans often have fixed interest rates, providing stability in repayment amounts over time.
A business line of credit can be used for various purposes, including managing cash flow, covering short-term expenses, purchasing inventory, financing projects, or taking advantage of business opportunities.
The amount you can borrow with a business line of credit depends on factors such as your business’s creditworthiness, revenue, financial stability and UCU lender policies.
- Flexibility: Access funds as needed up to your credit line limit, ideal for unforeseen expenses or fluctuating cash flow.
- Interest Savings: Only pay interest on the amount you use, making it cost-effective for short-term needs.
- Improved Cash Flow Management: Lines of credit can be a buffer during slow periods, allowing on-time payments to suppliers and vendors.
- Building Credit History: Responsible use of a business line of credit helps establish a positive credit history for future financing needs.
- Cash flow needs: Does your business experience seasonal fluctuations or require financing for unexpected expenses?
- Future plans: Are you anticipating growth or needing capital for upcoming projects?
- Creditworthiness: Do you have a good business credit history and strong financial statements?
If you answered yes to most of these questions, a business credit line could be a valuable tool for your business.
Failing to repay a business line of credit can have serious consequences:
- Late fees and interest charges: Defaulting on your payments will incur additional fees and accrue interest on the outstanding balance.
- Damaged credit score: Negative payment history will impact your business credit score, hindering your ability to secure future financing.
- Legal action: The lender may resort to legal action to recover the debt, potentially leading to asset seizure.
- Make timely payments: This is the most crucial factor in maintaining a positive relationship with your lender.
- Communicate openly: If you anticipate difficulty making a payment, contact UCU as soon as possible to discuss options.
- Maintain good financial health: Demonstrate responsible financial management practices to strengthen your credibility with the lender.
- Small business loans: Term loans provide a lump sum for specific purposes with fixed repayment terms.
- Business credit cards: Offer rewards programs and can be useful for managing small expenses.
At UCU, we understand that businesses need access to capital to thrive. A business line of credit can be a valuable tool to help you manage your cash flow and cover unexpected expenses. Eligibility criteria for a UCU business line of credit include factors such as the business’s creditworthiness, revenue stability, time in operation and the owner’s personal credit history. We may also consider the industry in which the business operates and its overall financial health and whether it maintains a dedicated business bank account.
Startups may find it challenging to qualify for a traditional business line of credit due to limited financial history and revenue. However, some lenders offer specialized products for startups, such as secured lines of credit or lines of credit backed by personal assets or guarantees.
Yes, there may be fees associated with a business line of credit, including an annual fee, maintenance fee, or transaction fees for each withdrawal. It’s essential to review the terms and conditions provided by the lender to understand all associated costs.
The time it takes to access funds with a business line of credit varies depending on the lender’s processes. UCU offers instant access to funds once the line of credit is approved.
While a business line of credit can be used for various purposes, including debt consolidation, it’s essential to consider the terms and interest rates carefully. Consolidating debt with a line of credit may offer repayment flexibility, but businesses should ensure they can manage the new debt responsibly.
Collateral requirements vary and may depend on factors such as the creditworthiness of the business and the requested credit limit. Some lines of credit may be secured by business assets, while others may be unsecured, relying solely on the business’s creditworthiness.
Business lines of credit are intended for business-related expenses only. Using a business line of credit for personal expenses can lead to confusion in accounting and may have legal implications. It’s essential to keep business and personal finances separate to maintain clarity and compliance.
Responsibly managing a business line of credit can have a positive impact on a business’s credit score by demonstrating creditworthiness and timely payment behaviour. On the other hand, defaulting on payments or maxing out the credit limit can negatively affect the credit score.