Statistics show that many small businesses fail because of problems with cash flow. Business lines of credit can provide companies with the capital they need to stabilize and grow. Here are some of the advantages of this form of financing.
Maintain Control of Your Finances
One advantage of business lines of credit over traditional loans is the ability to tap into a reservoir of funds when you need them. Instead of receiving and paying interest on a large lump sum, you access exactly as much money as you need and only pay interest on the amount you use. As soon as you repay the debt, you have access to the funds again.
Some loans stipulate how you must use the funds that you borrow. However, you can use financing from business lines of credit however you see fit. You have a ready source of cash to put wherever it is most needed. Additionally, repayment options are more flexible, so that you can pay off more of your debt when business is booming and pay the minimum when profits are down.
Enjoy Low-Interest Rates
Although lines of credit function similarly to credit cards in that they are revolving credit lines, they have much lower rates of interest. You can keep interest rates low by always making timely payments.
Handle Short-Term Needs
Lines of credit provide you with instantly available backup cash when you are faced with unexpected emergencies. Whether you need to repair equipment, pay contractors, or repair gaps in cash flow due to late-paying clients, your company can continue to run smoothly. If you use your line of credit strategically as needs arise, you can spend less time worrying about money and more time growing your business.
Improve Your Credit Score
Wisely using a business line of credit and always making payments on time can improve your credit score. Once you have established your reliability as a borrower, you can more easily obtain a traditional loan if you need one in the future.
For more advice on business lines of credit, contact Impact Commercial Capital.