If you run a business, you need to ensure that you always have enough working capital to operate. This is your short-term assets minus your short-term liabilities. When you have strained working capital or cash, it is helpful to get a line of credit. This can give you access to the cash you need to handle any expenses your business may be dealing with.
How It Works
Business lines of credit work somewhat like credit cards. They are loaned money, but you don’t receive a set amount that you pay back in installments (like a term loan). Instead, you have a credit limit. When you need money, you can take money out up to that credit limit. Then, you pay it back in whatever amount you choose above a minimum payment.
This makes lines of credit very flexible tools. They can help businesses with all sorts of expenses. Unlike some loans such as mortgages, lines of credit do not have restrictions on the use of funds. Therefore, you can cover everything from payroll to inventory to marketing.
Benefits of Using Lines of Credit
Using a credit line can help you to achieve a stronger financial position for your business. These are some of the advantages:
- Fast Funds: The money from lines of credit is available at a moment’s notice. Some lenders require up to a day to deposit the money in your account. Others can transfer it immediately. In either case, you will receive the funds much faster than any other financing option.
- Flexible Repayment: You can repay the money you borrow however you want. So, if you have a slow month, for example, you may want to only make minimum payments until you have stronger sales again. Then, when you hit a busy season, you can pay off the rest as soon as you are comfortable doing so.
- Ready for Use: Having a credit line available means that you always have an extra safety net. It is ready for use when you need it.
How To Apply
Applying for lines of credit is relatively simple. You will need your bank statements, tax returns and personal information such as your credit score. Some lenders may also ask for financial statements such as income and a balance sheet.
Discover more about the benefits of getting a business line of credit. This could be a helpful financial tool for your business.