Why a Line of Credit is Better than a Small Biz Loan
When it comes to business advice, trust the experts who work to pave a path for you. For example, businessman Warren Buffet says, “In the business world, the rearview mirror is always clearer than the windshield.” Financing Solutions managing partner Stephen Halasnik says, “A line of credit is usually better than a small biz loan.”
In business, the sooner you take ownership of a problem and decide to fix it, the sooner you can eliminate it. Therefore, if you have a problem getting a small biz loan, don’t just sit there feeling sorry for yourself. Go out and get yourself a line of credit instead.
Is a Small Biz Loan or Line of Credit Best for your Business
Every business will need to borrow money at some point. Whether for expansion, new opportunities or keeping your business afloat, borrowing money is inevitable. It’s not a matter of if you will borrow money but when. The only real question is what type of small business financing should you choose.
If you are only considering a small biz loan or a personal loan, you should be aware that there are other options. One of the best is a line of credit. Still, you may need more information before you decide.
You can only use a small biz loan one time. When you apply, it is for a specific reason and the bank will not let you deviate from that purpose. Once the money is gone, it’s gone. If you want more, you must reapply, and it will need to be for a different reason. Banks are typically not in the habit of lending for the same thing twice.
With a line of credit, the funds are revolving. This means that once you repay the amount you withdraw, those funds are then available for you to use again. The cycle can continue for as long as the line is open.
If you have a small biz loan, it comes with an automatic monthly payment. And these payments begin almost immediately after you receive your business bank loan. Worst of all, you must pay whether you actually spend any of the money or not. In addition, banks lock you into long term repayment schedules that will take you years to pay off.
A LOC is a more flexible and cheaper option because you can pay it off when you like. Even better, you only pay for what you use. In other words, if you don’t withdraw any funds, there is nothing to repay. There is also no long term commitment. Most businesses use their LOC only for a short period of time.
A small biz loan often must come from a commercial bank and a bank is hard to work with. Unfortunately, banks just don’t understand small businesses. As a result, they only want to work with businesses that have tons of collateral and exceptionally good credit. If you don’t, they consider you too big of a risk.
You can get a line of credit from an alternative financing company like Financing Solutions. With their immediate business funding, your business will be better off.