A small business line of credit works as one of the most common finance options for small business owners. By obtaining a small business line of credit, you can access funds that allow you to keep up with cash flow, your bills, and operate your business as you see fit.
Most small business owners obtain these lines of credit to help them with their cash flow. Even some of the best businesses experience cash flow problems. Such issues can include customers not paying their bills, a decrease in sales, unexpected payroll problems, and surprise expenses. Many small businesses have needs for additional funds. This is especially true in the messy economic times Americans have recently experienced.
Small business lines of credit are what are known as “revolving” accounts. This means that you can borrow from the credit line and add to it when you want. When you borrow from your credit line, you will need to make payments every month to pay off your balance. As long as you stay within the predetermined credit limit, you can borrow more at a later date. Many small business owners like credit lines because they get interest rates that were higher than the prime lending rate in the U.S. What this means for business owners is that small business lines of credit end up being cheaper than business credit cards.
How Small Business Owners Can Get a Line Of Credit
Before you apply for a small business line of credit, there are some things that you will need to put into place. Following these six tips can give you a better chance of successfully applying for a business credit line.
- Good Credit HistoryWhen small business owners start out, they will often experience cash flow issues. Even though you might make money from the very start, that money will often go towards payroll, inventory, and operations. Therefore, building up a credit history is of the utmost experience. Open up a business bank account. Once you do this, pay every bill on time, establish one or more phone lines, and open accounts with utility companies. Paying every bill on time will help you establish credit.
- Research LendersLook at a few online lenders to learn about their interest rates and loan terms. Consider your current bank as they could give you a good deal on credit lines. If your credit isn’t excellent, online lenders can often give you a credit line if you meet all of their other qualifications.
- Have A Positive Cash FlowIf you want an unsecured line of credit, you will need to demonstrate positive cash flow. Lenders will review all aspects of your business because they will not want to give funds to someone who will not be able to repay them.
- Be Responsible With Your Credit CardsNever use your personal credit cards for business expenses. Not only will maxed out credit cards hurt your score, they will not look good in the eyes of potential lenders. Maxed out credit cards will also increase the cost of borrowing money if you get approved for the credit line.
- Start Off Small If You MustIf your credit score isn’t that high, start with a credit line with a smaller amount. Ensure that you make all of your payments in a timely manner. Once you establish a good credit history, you can ask your lender to upgrade your credit line.
- Don’t Apply If You Really Need The MoneyMost lenders will only give you money if you don’t really need it. Lenders want to give capital to businesses with positive cash flow. In other words, you can’t have a desperate need for the money. When you have a positive cash flow, you will be in a position to pay back the funds in a timely manner and you will establish a good history with your lender. This will come in handy if you need a larger line of credit in the future.
Why You Should Consider Business Credit & Capital For Your Funding Needs
Business Credit & Capital gives small business owners the opportunity to do their work without needing to worry about obtaining money when they need it. Small business owners can apply for a business advance in minutes. Even applicants with a less-than-perfect credit history can obtain funding from Business Credit & Capital.
Business owners love working with Business Credit & Capital because they can use the funding in any way that they choose. They can also pay back the advance with a percentage from their sales. Because of BCC, small business owners across the United States can follow their dreams in a way that won’t leave them in massive amounts of debt.