Why do I need a Business Line of Credit?
Day to day demands can cripple an unprepared business.
Every business faces times of perilous cash flow. Smart entrepreneurs proactively establish a lifeline with which to navigate those perils. Even the simplest of demands can seriously drain daily operating cash and stunt growth or worse yet injure a vendor relationship to the point of no return.
If cash is “King”, (and it is), then a Business Line of Credit is “Queen.” A line of credit is there, by your side, when you need it; ready to help you through a shortfall, or assist in the purchase of supplies or inventory or other operating expenses. It provides a day to day level of consistency and constancy that is needed for the long-term relationship between payables and receivables.
It is a perfect marriage of form and function, here’s why.
A business line of credit does not require anything to secure it. Unlike other loans that dictate inventory as collateral, there is no such requirement for a line of credit making it an unsecured loan. There is a maximum amount set that can be borrowed, and, business owners can “draw down” on that loan as they deem necessary; they might take some today and some more tomorrow. A lone of this nature often dictates a higher interest rate, however, that is not the case with this type of loan. There can be times where the bank can limit or reduce access to the line of credit making it somewhat fickle.
Another attractive component of this loan is that there is no monthly payment until the loan is used, and then only on the amount withdrawn. This is quite a bit different then standard loans which may have a 30-day grace period, but, set interest on the whole loan and require a payment of the total.
The best of marriages requires a commitment.
A line of credit is a partner, that if used the correct way can provide a high degree of positive impact on your business. Used unwisely it can have the total opposite effect. It is not commonly a tool that can be used for everyday use or long-term. There is generally a fee each time it is “drawn upon”, and as mentioned the interest rates can become an issue. It is better when used as a partnership to promote the union.
How do I determine if I should apply for a Line of Credit?
Often times lenders are going to want to secure the loan with some type of personal collateral; a house, cash, stock, property, equipment or vehicles. Meeting this requirement is the first step in getting this type of loan. If there is sufficient demand for periodic operating expenses, this loan can be a good option as long as you have a good borrowing history and the income available for repayment.
We’ll help you find the perfect partner for your line of credit needs. We’re so confident we can make the perfect match for you that we developed one simple application with a “Soft Credit pull” that produces a list of potential suitors who are perfectly matched to your needs. The link below will get you started down the road to perfect business sense.