5 Advantages of Business Lines of Credit
Business lines of credit work like a company credit card, though they typically offer larger financing caps. Once approved, you can withdraw funds up to your limit to use for business needs. You only pay interest on the amount used. There a few things you need to do to get approved, but a line of credit can be one of the most valuable tools available to you. What are the benefits of this incredible type of business financing?
The Perfect Size for Business Needs
There are many times when you need to make payments that don’t quite fit other types of financing. Your company credit card is great for buying a laptop, but it probably doesn’t work for purchasing thousands of dollars in inventory. At the same time, you don’t want to have the hassle of applying for a term loan just to get $20,000. Business credit is the perfect fit because it gives you higher limits than a credit card.
Trustworthy Capital for Emergencies
The great thing about business credit is that you only pay interest on what you use, but you’re always approved. It’s like you have a financial safety net ready and waiting for the unexpected. Is your business dealing with a slow market or a natural disaster? With a line of credit, you can still make emergency payroll payments, tax payments or rent payments without sweating.
Flexible Capital for Cash Flow
Small businesses often have seasonal periods of increased and decreased sales. At certain times of the year, your phone may be ringing off the hook. During January and February, many businesses experience a slowdown in sales. With access to business credit, you can stabilize your finances and always have enough money to take care of essentials.
Freedom To Spend How You Want
With business loans, you often have to give the lender regular updates on how you use the money. You may have to submit financial projections or convince the bank that you have a good investment idea. With business credit, no one tells you how to grow your business. You can invest in marketing or expansion however you want.
Excellent Interest Rates
It’s true that business credit, like any kind of short-term financing, has a higher interest rate than term loans. However, compared to credit cards, business lines of credit are very attractive. As long as you make prompt payments, they can be a smart way to save money by capitalizing on sudden opportunities.
There are times when long-term loans are the best option for financing purchases, such as for buying expensive equipment or real estate. For many business needs, however, lines of credit are the perfect solution.