Everything You Need to Know About Business Lines of Credit
Keeping your business in top shape financially means being able to cover all of your regular expenses on time. Unfortunately, if business has been slow lately or you’re facing tough economic times, this may be easier said than done. If your company is facing a cash crunch but needs a short-term solution rather than a conventional bank loan, you may want to look into applying for business lines of credit. Unlike a lump sum loan, credit lines allow you to cover expenses as needed, and you only have to repay what you actually use. Here are a few essential facts about business credit lines that can help you decide whether they would be a good solution for your company.
It Can Be Used for Versatile Purposes
When you apply for a conventional bank loan, you typically have to specify up front exactly what you’re going to use the money for. However, if you aren’t sure what the near future holds for your business or what exactly you’ll need to allocate the funds to, having a catch-all solution may be better for your needs. With credit lines, you can cover a wide range of purposes without needing to specify ahead of time what you plan to use the money for. For example, if you need to fix old equipment, restock your inventory, start a new ad campaign or take advantage of a sudden business opportunity, having a business credit line can allow you to cover your expenses in a pinch.
It Can Be Secured or Unsecured
There are essentially two types of business credit lines available, secured ones and unsecured ones. A secured line simply means you have to put up one or more assets as collateral, whereas an unsecured line does not tie a specific asset to the loan. If you’re hesitant to put up collateral, a secured line may be better for you.
It Can Strengthen Your Business Credit Profile
Finally, one of the biggest advantages of using a business credit line is it can strengthen your company’s credit profile, giving you better odds of securing loans with good terms later on. Make sure to pay it off on time to avoid harming your score.
If your company needs access to a safety net of cash to cover expenses but taking out a large traditional loan simply isn’t the right option, you may want to consider applying for business lines of credit instead. If this is a route you’re considering, these essential facts can help you make the right decision.