What Is the Impact of COVID-19 on Lines of Credit?

The COVID-19 pandemic led to a considerable shock to corporate revenue streams. It left many firm owners with less available working capital to cover accounts payables. 

The Consumer Financial Protection Bureau (CFPB) issued a report concluding that as of June 2020, there wasn’t a notable increase in pandemic-related credit delinquency. The report attributed this fact to payment assistance from federal, state, and local programs targeted at furnishing payment assistance to borrowers.

U.S. banks stepped up to offer multiple financial initiatives. Programs intended to aid business owners impacted by the coronavirus pandemic with their lines of credit and other funding products. Financial institutions took these actions to spur recovery and curb economic damage.  

Bank Policy Modifications on Lines of Credit

Open-ended lines-of-credit work like a credit card in that when approved by a lender, business owners receive a set credit limit. 

They give business owners the flexibility to borrow money as needed up to a preset limit. This limit can be decreased or increased at the bank’s discretion.

When economic uncertainty hits, business owners draw from their business lines of credit to fund operations. During the COVID-19 crisis, bankers and lenders modified their lines of credit policies to help small business owners stay afloat. They offered:

  • Deferred lines of credit payments
  • Reduced rates
  • Interest-free lines of credit
  • Late fee forgiveness
  • Increased credit limits

Deferred Lines of Credit Payments

A typical financial assistance arrangement many lenders offer to small business owners is the opportunity to defer business loan and line of credit repayments. For example, some banks have allowed a 30-day payment deferral with no late fees, while others have increased this to 90 days. Still, other banks have offered an extension in addition to payment deferrals.

Reduced Lines of Credit Rates

Some banks have cut their business lines of credit rates to ease COVID-19-related cash flow stress for small business owners. For example, U.S. Bank temporarily dropped interest rates by 1% on newly established unsecured and secured lines of credit through its Cash Flow Manager program. 

Other banks have extended interest-free and short-term lines of credit to assist small business owners during the pandemic.

Interest-Free Lines of Credit

A handful of banks have offered interest-free lines of credit for small business owners during the crisis. That includes lenders extending five-year lines of credit for up to $200,000 with three months of no interest for COVID-19-impacted firms. Other lenders have created interest-only and emergency lines of credit options for affected customers.

Late Fee Forgiveness

Whether it’s online lenders or traditional brick-and-mortar banks, most institutions waived late charges on various financial products. These include term loans, lines of credit, and credit cards. Moreover, many banks extended their late fee forgiveness into late 2021.

Increasing Credit Lines

Another typical COVID-19 response initiated by lenders and banks were credit line increases. Depending on the institution, an increase could be on new or existing business credit lines. 

Check with Your Bank for More COVID-19 Relief Programs

These are only a few of the methods lenders used to help firm owners who felt the fiscal impact of COVID-19. We suggest contacting the institution where you do your banking for details regarding any small business relief programs they provide. 

Banks often provide more information over the phone than what is listed on their websites. 

In addition to lines of credit, many banks continue to offer relief programs, including:

  • Business credit cards 
  • Personal credit cards
  • Personal lines of credit
  • Personal loans
  • Waiving ATM fees

Qualifying for a Line of Credit

Getting a line of credit to boost your bottom line during the pandemic may be challenging if you have poor credit or have been in business for a short time. 

Despite programs helping small business owners, many fail to qualify. The reason for this comes down to how the lender evaluates your risk level.

To qualify for a line of credit, most banks and traditional lenders require: 

  • Your company to have at least a few years of business history. 
  • Strong revenue.
  • Collateral, especially for larger lines of credit.
  • Good credit score of 680 or higher.
  • Business planning documents

Additionally, compared to other financing methods, lines of credit often offer lower borrowing limits. If the coronavirus pandemic heavily impacted your firm, you need financing to help you recover day-to-day operations. 

Consider an alternative financing source like the Revenued Business Card.

Ease the Impact of COVID-19 with the Revenued Business Card

The impact of COVID-19 put tremendous pressure on you, as a small business owner, to continually source ways to fund your firm as working capital dries up. But what happens if you can’t qualify or if your line of credit was closed or maxed out? 

The new Revenued Business Card is here to help. Our business card provides short-term funding for firm owners with poor credit but strong sales.

With the pandemic interrupting commerce, you must have access to a flexible form of funding. Use our business card to cover utilities, mortgages, payroll, and more while you re-establish your financial footing — or use it as a readily available source of emergency funds. 

It is easy to qualify, and you only pay for what you use

How to Qualify for the Revenued Business Card

Your company can qualify for the Revenued Business Card if it: 

  • Has a maximum of three days of negative balance per month.
  • Has a monthly minimum of $10,000 in sales revenue.
  • Has been up and running for at least six months.
  • Has no previous merchant cash advance defaults.
  • Is based in the U.S.
  • Is not associated with the financial or banking industry
  • Sustains a minimum daily average of $1,000 in a business bank account.

While lines of credit are an excellent option if you have good credit, the Revenued Business Card gives peace of mind for the rest of us during these uncertain times. 

Get More Information by Reaching Out Today

Find out more information or sign up for the Revenued Business Card by filling out our online form or dialing +1-877-662-3489.

We're working on some pretty cool new pieces of content, including tools that will give you insight into your business finances.

Want to be the first to know when they launch?

Do You Need Good Credit to Open a Business Bank Account?

The first thing on a new business owner’s to-do list should be opening a business bank account. An account in your company’s name provides a separation between personal and business finances. It also establishes legitimacy in the eyes of potential customers and creditors. Most people expect lenders to scrutinize their credit history during the loan […]

Do You Need a Detailed Business Plan to Apply for a Business Loan?

Your business needs a loan. Maybe you are just getting off the ground or needing capital to fuel an expansion opportunity or fund your next big project while waiting for customers to pay their invoices.  Whatever the reason, you will need to make a good impression to have a shot at a traditional bank loan. […]

Are You Personally Liable for Your Business Loans?

When you take out a loan in your business name, you probably plan on having enough steady revenue to cover the payments. When the unexpected happens — sales drop off, expenses skyrocket, or you deplete your rainy day fund — your business may not be able to shoulder the burden the way you’d hoped. If […]