The Advantages of Using Business Lines of Credit
Uncertain cash flow is a major cause of small business failure throughout the country. Whether you’re considering your first small business or you have been operating a business successfully for a number of years, cash flow is typically a common source of financial hardship. If you’re struggling with low levels of working capital, discover how business lines of credit can help you improve your situation and grow your business successfully.
Just like a personal or business credit card, your line of credit can be used to spend money on business expenses at the precise time and for the precise amounts that you need. These lines can be secured or unsecured, used for any business reason, and unlike a business loan, a line of credit doesn’t accrue interest until you actually need the money.
One of the most significant benefits when using lines of credit is control of your finances. Small businesses can be crippled by an unexpected expense, major purchase or even routine ebbs and flows of the market. A large amount of working capital keeps you free from the daily stress of money coming in and going out. Although your line of credit will charge interest once you withdraw money, you can quickly repair your debt as your business grows.
Compared to traditional business loans, angel investors, crowdfunding or other sources of loans, your line of credit will offer you unmatched freedom to spend it when you need it and avoid interest when you don’t. While some credit lines require a yearly fee to remain open, this fee is usually far less than the interest you would be paying on a bank loan.
A line of credit can also help you build your credit. Many small business owners struggle with poor, low or non-existent credit. Opening lines of credit and paying them off on time is a great way to build credit, which is essential for other loans in the future. Once you have a high credit score, you’ll be able to enjoy greater freedom in selecting the best loan type for your particular needs.
Don’t let poor cash flow hold your business back. From a large inventory purchase to new equipment or a sudden investment opportunity, receive the financing you need to respond quickly to sudden changes in the market. Navigating your first few years as a small business owner can be full of difficulties, but lines of credit are available as lifelines to help you thrive in a competitive market.