Lines of credit equal flexibility for small businesses, because they provide a renewable source of funds, available any time you need it, to grow your business. Of course, there is an upper limit on your credit and you must pay interest, but lines of credit typically carry a much lower rate than a credit card. Here’s why you should consider applying for a business credit line.
Advantages of Opening a Business Line of Credit
With a business line of credit, you typically enjoy:
- Lower interest than a credit card. Interest rates are typically lower than credit card interest, but higher than a conventional, non-renewable, business loan. An annual administrative fee generally required.
- Convenience and speed. There’s no need to reapply whenever you need funds–simply draw from your available credit line balance.
- Even cash flow. Even though your cash flow may fluctuate, (by season, for example), you can stay in business until your clients need your services in the near future.
- Freedom to jump on business opportunities. If you see an opportunity to purchase new equipment at off-season prices, your business line of credit allows you to make that purchase, or buy inventory/parts in advance for next season.
- Ideal conditions for medium-sized purchases. Some business purchases are simply too big to use your credit card, but not big enough to necessitate a business loan. (Avoid meeting payroll or financing major equipment/property purchases with your business credit line of credit. Apply for a loan instead.)
- Short-term emergency funds. Your credit line can keep you in business after a disaster, for example.
- Flexibility. You can repay, and borrow again, as necessary without needing to re-apply.
Line of Credit Qualifications
Details vary by lender, but to qualify for business lines of credit, you must have a favorable combination of:
- Lengthy business history and/or proven track record in your industry.
- Business that shows profits.
- Collateral. This may be required, however unsecured lines are available.
- Reliable personal background and good credit rating.
If you’d like to enjoy the freedom offered by business lines of credit, contact All Things Commercial Capital for further information.