Managing a business requires many financing tactics, as you may never know when you run short of revenues. You may encounter problems such as irregular cash flows and other issues that might affect your daily operations. Thus, you need to have an alternative source of funding to cater for your short-term financial needs or emergencies. Luckily, a corporate line of credit provides a handy solution during such moments. It allows entrepreneurs to access finances inexpensively. Here are some of the advantages that the business line of credit offers to entrepreneurs.
Quick Access to Finances
A business line of credit is the best option if you need quick access to finances to fund your business. Lines of credit do not require collateral since the loans are mostly unsecured. If you need a substantial amount of loan, you can use your personal or business assets as security. The application method is straightforward, and the disbursement does not take an extended period. The quick access to loans minimizes the cost associated with the application and also allows you to use the money for emergencies.
Business lines of credit charge a relatively lower interest as compared to the rate of other loans. Although the rate fluctuates, it is usually lower than what most credit cards offer. If you settle your loans on time, the interest rates will stay low and give you the chance to enjoy more capital at low rates. Moreover, the interest rates for lines of credit depending on the amount you use. For instance, if your credit line loan is $ 100,000 and you use $ 30,000 to expand your business, you will only pay interest for the used $ 30,000.
A line of credit allows you to access funds when the need arises. It offers flexible terms of repayment and does not provide restrictions on how you use the funds. For instance, you can use it to create awareness of your product through advertising or financing a new opening, which you may not afford with weak cash flows. Such flexibility gives you the financial space you require for the right decisions for your business.
Better Credit Rating
Your business requires an excellent credit history to enable you to access the best loan terms. Although many ways can help you improve your credit rating, long credit history with timely payments significantly boosts your credit score. A business line of credit could, therefore, help you maintain a good credit rating.
As you can see, business lines of credit buffer small businesses against emergencies. However, lenders extend that favor to businesses with a well laid financial record.