Your company needs the ability to evolve and grow. Securing business lines of credit gives you the cash on hand to take advantage of new opportunities or handle working capital needs to keep your organization on the path to success.
What Is a Business Credit Line?
Like a credit card, this type of funding provides access to a set amount of capital. You can choose how and when you use the available funds.
Traditional loans give you a lump sum of money to spend in a specified manner. You then repay it according to the bank terms and rates. A credit line does not specify how you spend the money and is available when and if you need it. You repay only the amount you use. Once repaid, the full amount is accessible again for future needs.
This revolving funding option is subject to review and annual renewal. Interest does not accumulate until you take money out. There may be minimum or maximum withdrawal amounts set by the lender.
How Do You Use Lines of Credit?
This financing option offers the benefit of choice. The lender does not dictate your spending. You decide how and when to use the available funds. Some possible uses include:
- Emergencies such as flooding, roof repair, equipment maintenance or other unforeseen events require money to address. If you have this financing, you will have funds available to correct the problem and get back to business.
- Investment opportunities can arise out of the blue. If you do not have money set aside, you may miss your chance for growth.
- Equipment purchases like computers, headsets or office chairs may be necessary for your daily operations. Financing in this way gives you the ability to buy these when you need them without acquiring an equipment-specific loan.
- Inventory needs can be expensive but are a necessary operating expense. If revenue is down during a slow month, this funding allows you to get the items you require.
- Cash flow issues arise during seasonal slumps or fluctuating income. This financing will enable you to pay bills or meet payroll when revenue is down.
What Are the Associated Costs?
The expenses involved will vary depending on the lending institution and your financial history.
All organizations face challenges to keep their companies operating smoothly. Having access to lines of credit can solve many of these issues, ensuring your ability to achieve your goals and sustain growth.