Are you in the process of learning more about a business credit line? Do you have reason to believe that this could be the best way to finance a future purchase?
Much like anything else you’ll do in the way of finances, you need to learn more about a business credit line before you sign on the dotted line and begin to use the money.
For most, this means starting with an overview of the benefits. Once you know the reasons to opt for a business line of credit, you can determine if it makes sense for your business.
So, with that in mind, here are some of the top benefits:
1. Only Pay Interest on Funds Drawn
Unlike a small business loan, with a business credit line you only pay interest on funds drawn. In other words, if you don’t want to access the available funds you’re not required to do so (or pay interest).
This is a big benefit if you don’t have any set plans for the money. For example, seasonal businesses often use a business credit line to get through slow periods during the year. However, the money is not needed at other times.
2. Fast Access to Cash
The problem with a credit card is that you don’t have access to cash. Sure, you can make a purchase and then pay it back, but this isn’t the same as actually having cash in hand.
Even better is the fact that you can apply for and receive funding within a matter of days (sometimes within 24 hours). This is lightning fast in comparison to loans, which can take several weeks to receive an approval.
3. Suitable for Many Purposes
Regardless of your industry, company size, or location, there could come a point when you need outside cash.
The nice thing about a business credit line is that it can be used for many purposes. Maybe you need the money to purchase equipment. Or maybe you need the money to pay a contractor for a recently completed project.
It doesn’t matter what type of expense you’re facing, there’s a good chance you can use the money from a business credit line to fund the purchase.
4. Bad Credit is Okay
There is never a good time to have bad credit, but some people (and companies) find themselves in this position.
With bad credit, it’s never easy to secure a credit card or loan. However, you may find it much easier to qualify for a business credit line.
Note: bad credit typically means a higher interest rate.
5. Help You Build Your Credit Score
If you find that your credit is less than desirable, you should immediately search for a fix. There are many ways to boost your score, and using a business credit line is one of the best.
As long as you access the funds and make timely payments, it will have a positive impact on your credit score.
Questions to Ask Potential Lenders
Now that you understand some of the top benefits of a business credit line, you should consult with a lender to learn more about moving forward with the application process.
- When doing so, here are some of the questions you can ask:
- What does the application process entail?
- What type of information do you need to make a decision?
- How much will my business qualify for?
- How long will it take to receive the funds (if an approval is given)?
- What interest rate will my business qualify for?
Some of these questions can be answered upfront. Others, however, can’t be addressed until you complete an application.
Regardless of if you move forward or not, don’t hesitate to ask your lender these types of questions. If nothing else, the answers will allow you to better understand what a business credit line is all about.
There you have it. You should now have a clear idea of what you can get out of a business credit line. The only thing you need to do now is decide how to move forward.
What are your thoughts on using a business line of credit? Have you done this in the past? Would you consider doing so in the future? Share your thoughts in the comment section below.