How a Business Line of Credit Helps Your Business
A business line of credit helps your business in many ways. To succeed in business, you need every tool and aid you can get your hands on and a business line of credit is perhaps the most crucial implement in your arsenal.
The term business as usual has almost become obsolete. There is no normal way of doing things anymore. Today, everyone is looking for new ways to innovate and to excite customers. If there is anything that has remained constant, however, it is the importance of having a line of credit to help your business.
How Can a Business Line of Credit Aid in Your Success?
Every business, big and small, requires cash to handle routine operating expenses, such as making payroll, paying bills or taxes, and purchasing supplies. When you have a positive cash flow, you are better able to manage your business.
Consequently, a cash flow shortage can severely restrict the things you are able to do. Not having access to enough cash can have you running in circles, trying to move funds from one area of your business to another and hoping you can eventually get everything back in order before anyone notices. The biggest disadvantage of all is the time you waste by operating this way, hours and days that you could be using to instead focus on how to grow and improve your business.
When you have a business line of credit, this type of situation is less likely to occur since you will have the extra cash you need for payroll funding, to cover your expenses and take advantage of good opportunities that come your way. It is like a reserve of fast cash you can use whenever you need it.
For example, if you are waiting 30, 60 or 90 days for a big client to pay you for an account receivable, you are not stuck without funds during that time period. You can rely on the money from your business line of credit to get you through this temporary cash shortage.
This kind of help is especially important for businesses which are seasonal or those that experience various highs and lows throughout the year. It can also aid businesses that need to frequently hire temporary staff or require lots of expensive equipment that needs to be replaced often.
How Does a Business Line of Credit Work?
Many people believe a business line of credit is synonymous with a small business loan but this is incorrect. A loan is typically money you borrow for a specific purpose while a business line of credit is designed to be used for a longer period with no restrictions on how the funds are spent.
In addition, a loan typically requires a long-term commitment. It can take between two to six years to pay the money back.
A business line of credit is unique because although it is a type of fast business loan, the terms are drastically different. When you apply for a business line of credit, it is like someone putting money in a box for you and you can take cash out of it as needed. Then, when your cash flow situation improves, you can replace the funds you took.
Similar to a credit card, you only have to pay back the money you have used. Therefore, if you have not used any funds from your business line of credit this month, there is nothing to repay.
What is the Best Way to Obtain a Business Line of Credit?
As with any endeavor, there is usually a right way and a wrong way to do it. For a majority of small businesses, traditional banks are the wrong place to go for a business line of credit. Due to the amount of collateral they require, most small businesses will not qualify.
Even if the bank does agree to help, the most you will walk away with is a home equity loan for your business. This requires you to use your home as collateral, meaning that if you can’t keep up with the payments, you may lose both your business and your residence.
An alternative lender, like Financing Solutions (www.fundmypayroll.com), is the right place to go for a business line of credit. You can get the money you need for a business line of credit with just a quick application. In addition, it comes with favorable terms and an easy repayment schedule. Getting cash to start a business line of credit is the first step toward gaining control of your cash flow issues.