Is a Credit Line an Asset?
You are your company’s greatest asset. As a small business owner, you hire the people, make the tough calls and wear many hats. One of your most important responsibilities is arranging financing, so you must know if a credit line is an asset.
In your role as chief strategist, it’s up to you to weigh the pros and cons of every decision. Therefore, you must ask yourself is a credit line an asset and, if not, is it the right choice for your business. The answer could determine whether your company survives or fails. It’s vital to have all the facts.
Why Isn’t a Credit Line an Asset?
A line of credit can be a lifeline for a small business. It can give you the immediate business funding you need to make payroll and handle daily expenses even during slow sales periods. With such a vital role, it would seem like an asset.
No, a credit line is not an asset. If you owe money on your line then it would show up as a liability on your balance sheet.
When you list the line of credit, you only have to record the portion you have actually withdrawn, not the whole amount. What’s worse is that if you can’t repay what you borrowed from the line within a year, it goes on your books as a long term liability.
This means that, as far as your records are concerned, it’s treated the same as a small business loan. Even if you have not made a withdrawal, it still must be recorded as a short term debt.
Where to Go for a Credit Line
It is always a good idea to have a primary or backup line of credit for your business just in case. Every business goes through ups and downs in cash flow and having a place to turn to is a smart business decision.
Financing Solutions (www.financingsolutionsnow.com) makes it easy to get a line of credit verses the hoops you have to jump through at a bank. At a bank, the most you will qualify for is a home equity line of credit. This is a secured line of credit that requires you to put your home at risk.
With Financing Solutions, you are never charged until you actually decide to use the line. Other lenders typically charge a fee just to keep the line in place, whether you use it or not.
Why the Intangible Assets Are Crucial for Your Business
Knowing your tangible assets, such as inventory and real estate, is important for your business. However, there are numerous attributes that are never listed on a balance sheet but are critical to your success and which must be given careful attention.
For example, your reputation is a key advantage. It’s why clients trust you enough to give you their business. If it ever gets damaged due to scandal or mistakes, it’s hard to regain your good name, so protect it.
Your employees are also a huge plus. They are the ones your prospects and clients interact with and can make or break the customer experience. It’s vital to keep your staff happy, productive and well paid by always making payroll on time.
Of course, knowledge is one of your best values, such as knowing where to go for instant business financing. With help from Financing Solutions, your business can use all your assets wisely.