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Admit it; starting a business is no easy feat. You’d have to come up with a business idea, draw up brand objectives, hire or buy equipment, pay staff, pay for office space – while dealing with the daily operating costs. Most of these issues are directly tied to funds. Without it, your business is non-functional.
For every small business, the role of funds cannot be downplayed. Most lenders and financial institutions will not grant your business a loan if your credit score isn’t satisfactory.
Well, that’s where the business line of credit comes in. Our previous article covered what it means and how it works. This article will be looking at the many benefits of having one in place.
Enhance Your Business Credit
One of the many benefits of having a business line of credit is that it helps you maintain an impressive credit report. A satisfactory business credit is quite similar to having an excellent personal credit.
For instance, your creditworthiness is essential in being eligible to receive student, car, and apartment loans with the best interest rates. The reverse is the case if your credit report – particularly your credit score – is unsatisfactory.
It’s the same thing when dealing with business credit. If your business credit score is low, you won’t get the best out of deals with lenders. At best, when they grant you loans, you may have to pay them back with higher interest rates. Thus, building your credit while keeping your business afloat is essential.
The recommended way to achieve that is to have a line of credit. As you run your daily operations and make timely repayments while maintaining a low balance, your credit score will continue to rise.
This will better prepare your business to gain deals, garner investors, and attain competitive dominance, knowing that your credit score is now impressive.
Faster Approval
Another benefit to getting a line of credit for your business is that you’re going to get approved in no time. This is different from regular lending, where they’d need to carry out a hard inquiry on your credit. The problem with hard inquiries is that they limit your credit scores, which may prevent you from obtaining a regular loan.
With a line of credit, you don’t have to worry about hard checks or getting declined when you apply for a loan.
Separate Business Expenses
It is often difficult to separate business and personal expenses when running a business. It is commonplace to see business owners use business funds to handle personal expenses and vice versa. The lines are virtually blurred when it comes to personal and business costs.
That’s why you need a business line of credit. What it does is help you differentiate your business and personal expenses. When you take a line of credit, you instinctively know that it’s meant for the company, and you’d not want to spend it for other reasons.
Flexible Repayments
Another unique benefit to having a business line of credit is the flexible repayment terms you can agree on. When you apply for a typical business loan and get approved, you are meant to repay it on a specific date.
When you breach that contract by late or missed payments, your credit score will likely take a hit, and connections between you and your lender will be severed. You’re not going to experience this with lines of credit.
With a business line of credit, you will set a flexible repayment plan that can be tailored to your best interests. Another unique benefit to a line of credit is that you can opt to repay the minimum amount if your revenues are a bit slow. This is way different from a typical loan where you’d have to pay a set amount every month.
Establish Control of Capital
A business line of credit also gives you control over managing your business. When you request a typical loan, you’re going to get a lump sum of cash to be repaid at a fixed rate.
This will be a problem if an unforeseen event requires more funds to be handled. For instance, one of your clients may require a certain number of products to be delivered. If you don’t have the specific amount readily available, you may need additional capital to procure it.
With a business line of credit, you are in complete control to decide how much money you need. More so, you can choose when you want to make the withdrawal. Thus, you have more control over your finances and how you decide to spend them. With such credit at your disposal, you can take advantage when there’s a window of opportunity to make some good profit.
You won’t experience this with traditional loans.
Improve Cash Flow
As a business owner, you may deal with periods of low revenues, making it difficult to process payroll for your employees. It is almost impossible to use your credit card to pay your workers.
Thus, a line of credit might suffice. You can simply make withdrawals from your line of credit pay off your workers while keeping the business afloat. Whenever you face issues of the sort, a line of credit is the recommended solution.
Final Thoughts
In conclusion, a business line of credit is an excellent way to run your business if you’re just kicking off with little to no support. You get faster approval when you apply for a line of credit instead of a business loan.
It’s also an excellent way to improve your credit score – as timely payments will revamp your creditworthiness and make you more eligible to apply for typical loans.
Here at Bunny Lender, we are committed to providing you with trusted lenders across the country. These lenders will look up your needs and provide you with a line of credit to keep your business in operation.
