From small bumps in the road to major investment opportunities, there are many times when your business could use lines of credit. Just like personal credit, your business can take out many different forms of credit in order to capitalize on an investment opportunity or solve a cash flow issue. Find out more about how a business credit can keep your business profitable and flexible.
In order to take advantage of a line of credit, you’ll need to qualify. The qualification process is typically faster and easier than a traditional bank loan or small business loan. Many lines of credit will look at your credit score and payment history.
A line of credit, unlike a loan, typically has higher interest rates. This is only a downside if you are planning on holding the debt for a long term. The best way to capitalize on your business credit is to take out only what you need and pay it back quickly. Short-term financing negates much of the disadvantages that come with having a higher interest rate. Some types of credit can have interest rates as high as 40 percent.
You can choose from online providers, credit unions or traditional banks to secure your business credit. Creditors typically want to see that your business has been operational for at least six months, and some prefer businesses that have been established for two years or more.
Business lines of credit have a lot in common with business credit cards. Both provide a fast, yet high interest, way to gain the capital you need to get through a short-term financial situation or investment opportunity. However, there are important differences between the two. A business credit card is typically an unsecured credit. This means that there is no collateral. Because credit cards aren’t asset-backed, they can be more difficult to receive. You also may be given a lower credit limit or higher interest rates. A business line of credit, on the other hand, is usually secured. It may not offer the same incentives of a credit card, but it’s a great way to get a larger amount of credit with a lower interest rate.
From major expenses to small cash flow issues, business lines of credit are specifically designed for businesses like yours. This dynamic credit option is flexible enough for a variety of needs and businesses. Whether you’re a small business or a large corporation, consider how this type of credit can help you with any financial situation you may be experiencing.