Small businesses have a plethora of financing options available for different fiscal needs, but perhaps one of the most underrated is revolving lines of credit. If you’re used to having to apply for large loans every time your company needs to finance payroll, new products, new locations or something similar, the concept of using a credit line to cover certain expenses may be new to you. However, credit lines can be a uniquely helpful tool if you understand their ins and outs and know how to use them to your business’s advantage. Here, you can learn more about what makes revolving credit lines a standout option for business financing.
Special Business Lines Usually Have Good Interest Rates
If you’re thinking a credit line sounds similar to a credit card, you’re right in some regards. However, one fundamental distinction is that lines of credit aimed especially at businesses typically have lower interest rates than standard personal credit cards. While this hinges on meeting lenders’ expectations, you could potentially expect to pay less in interest by using credit lines.
The Money Will Be Available at All Times
Waiting for loan approval to come through generally means not knowing when you’ll have access to the funds you require. With a credit line, money is usually available at any time, giving you an extra safety net and taking some financial worry off your shoulders.
It’s Secured Yet Open-Ended
One of the most significant pros in using revolving credit is that although you generally will have to secure it by putting up some sort of asset or assets, it’s fully open-ended. This means that as long as you don’t spend in excess of your credit limit, you’re free to use as much or as little of the available funding as your company needs. Of course, you should always keep in mind that whatever you spend, you’ll then have to pay back, whether in full at one time or in installments of minimum payments. Regardless, the flexibility makes it great for lines of work that do not always have predictable or fully fixed expenses.
Although it might not be the answer for every fiscal problem your business may face, there are several situations where using revolving lines of credit rather than applying for large bank loans could be the better route to take. Now that you understand what makes this financing choice unique, you can add it as an extra tool and wield it to support your company goals and plans.