More than 80 percent of the time, small businesses fail due to mismanagement of cash flow. While nearly every business deals with cash flow issues, the most successful ones understand how to access business lines of credit and other financial resources. Learn more about the benefits of business lines of credit below to decide if this is the right move for your company.
Understanding Business Lines of Credit
When you receive a line of credit on behalf of your business, you can borrow up to the credit line each month. You pay interest only on the amount you access, and there’s no minimum you must use each month. This option is similar to a business credit card. One big difference between the two is that the cash advance fee is much higher with a credit card than business lines of credit. In fact, lenders expect you to regularly request cash advances.
Greater Flexibility than a Business Loan
A bank loan is for a set amount with fixed payments each month. That may not always work with your budget, especially if you have big fluctuations in seasonal revenue. You can also use the proceeds from a business credit line however you see fit. With some bank loans, the lender can dictate how you use the funds.
Lower Interest Rate than a Credit Card
You can expect to pay the prime lending rate with a business credit line. Set by the average interest rates of the top 25 banks in the country, the rate does fluctuate accordingly. It’s almost always lower than a credit card, however. You can potentially lower your interest rate by paying your business credit line on time each month.
Faster Processing than Business Loans or Credit Cards
Bank loans and credit cards take several weeks to process, meaning you must wait for your funds. You could even wait a few months with a bank loan only to find out it’s not approved. Save yourself the aggravation and apply for business lines of credit you can access right away.
Please don’t hesitate to contact Impact Commercial Capital with additional questions about business credit lines.