When your small business is just spreading out its wings and starting to grow, an injection of extra funds can make a world of difference. According to a Federal Reserve survey, Forty-Three percent of small businesses applied for additional financing in 2019! In times of uncertainty or staggered cash flow, a business line of credit can prove to be a lifesaver.
There can be many situations where a line of credit for your small business can help you out. It can help you with paying your overall costs, buying equipment, or repaying any business loans. And there are many business lines of credit lenders in the market. In this article, we will take a look at how you can get a business line of credit. Keep on reading to learn more.
Do You Know What A Business Line of Credit Is?
The best way to describe a line of credit for a small business would be to think of a credit card instead of a loan. It is a credit card for your new business. A business line of credit lenders will set you up with access to funds. You can use these funds to address your business expenses. And you will not have to worry about a lump-sum payment when you open your account. You will also not have to worry about monthly payments.
Similar to a credit card, your line of credit will be subject to annual renewal and credit review. You will have to pay interest according to the funds that you withdraw. Once your outstanding balance is paid, you will be eligible to withdraw the same amount again using your line of credit.
Much like a credit card, lenders will set a limit on how much money you can withdraw at a time. This is what a line of credit is. We are sure that you can already see how it can help your small business when you are starting out.
Which is better, a line of credit or a short-term loan for a new business?
There are advantages and disadvantages to both. In most cases for a business line of credit works better than a short-term loan. This is because you can use a business line of credit for any purpose related to your business. With a loan, you may be able to get a larger sum of money. However, with the larger sum comes very strict criteria and collateral. So, it really depends on your needs.
If you are looking to front the running cost of your small business or purchase new equipment, then a small business line of credit will be ideal. However, if you are looking to obtain a larger sum of money, a short-term business loan might be more suitable for you.
When it comes to financing options for a small business, there are many advantages of going with a business line of credit. You can click here to contact us and learn more about how you can get a business line of credit for your small business.