Many businesses struggle with consistent cash flow in their business. If you are struggling with cash flow, maybe customers are not paying on time, sales go down, or equipment downtime, it can prove to be a challenge. All businesses need consistent cash flow to deal with daily operations, unexpected challenges and ensure the successful running of the company.
To ensure you never find yourself in trouble, you need some sort of business fund to help you access money quickly. This is where having a business line of credit comes in handy.
Let us look at the benefits of your business having a line of credit.
You can use money from a business line of credit as you deem fit. Money from a business line of credit is not like money you get from close-end loans where you have to use it for a specific purpose. A business line of credit provides your business with unmatched flexibility to use the money where it is very much needed.
Additionally, traditional loans come with fixed monthly payments that may be a bit challenging for some businesses. Using a line of credit is more flexible in payment options making it easier to work with the feast and famine that most companies experience.
There is an option to pay off a high percentage of the balance when your business is doing well and pay a minimum balance when your business is not doing so well.
With such flexibility, you can regulate cash flow in your business, which is the lifeblood of your business.
If you make payments on time with your business line of credit, it builds credibility. It may improve your credit status when you want to borrow money from other financial institutions.
Most of the time, financial institutions deny businesses loans because of bad credit. But a business line of credit can help you just ensure you make payments on time.
Remember, a Business line of credit may help provide cash flow for your business, but as your business grows, you may need another form of funding to grow your business.
The interest rates for a business line of credit are usually lower than credit card interest rates. Most unsecured business lines of credit will use the set-prime lending rate, which does fluctuate but never goes very high.
If you pay on time, your interest rates will remain low, and you will always have access to money you can use in your business and even raise your limits over time.
Source of funds for emergencies
Business experience emergencies, and having a business line of credit assures you that you have money somewhere you can always bank on to take care of your short-term needs. You wouldn’t want your business to stop operating because of lack of funds.
The good thing about having a business line of credit is that you can access the funds almost instantly, even if you don’t use it so frequently. For example, you may lack money to pay suppliers, but you can always pay them with a business line of credit, and your business will keep running.