Growing Your Business With Lines of Credit
When your business needs a boost of some serious working capital, it’s time to take out a line of credit. From an emergency safety net to a great way to invest in additional marketing and inventory, learn how a line of credit can improve your financial situation, and compare several lines of credit to discover the best option for your business.
Most credit lines work in a similar way. They all offer you a maximum credit limit to be taken out whenever you need. When you apply for a line of credit and become approved, you don’t have to begin making payments with interest. Instead, your line of credit works as a safety net and is always available, but doesn’t accrue interest until you’re ready to take out your loan.
Think of a line of credit like a credit card. However, you’ll typically enjoy lower interest rates and longer loan terms than a credit card. Depending on the type of credit line you become approved for, your credit will operate more like a conventional loan or business credit card.
Short-term lines of credit are designed to give you a quick amount of cash for a short period. This means that, once you take out your credit, you’ll have to pay it back in full, plus interest, in as little as three months. This is the downside of a short-term line of credit, the advantage is that it’s much easier to apply and become approved for these credit options.
A medium-term line of credit allows you to take out more money, enjoy lower interest rates and stretch your payments out across longer term limits. Of course, there are a few downsides to this type of line of credit. First, you’ll need a higher credit score and longer business financial history to become approved for a medium-term line of credit. You may also pay more in interest due to the long-term nature of the payment plan.
A line of credit is available from a traditional bank or private financial institution and can be used for general business expenses. Some are backed by an asset, like equipment or real estate, while others aren’t secured but require a higher credit score and other application factors.
Take charge of your finances and use lines of credit to balance your cash flow issues and keep your business afloat during difficult times. Grow your business successfully without waiting for an inflexible conventional loan.