Using Business Lines of Credit To Grow Your Company
Financing growth is a common way to set budgets and keep cash flowing through a small business. It’s not so much a question of whether you will benefit from the practice, but more a question of which financing products best suit your business. For a lot of reasons, companies across a wide swath of industries choose lines of credit for this task, and for good reason.
Flexible, On-Demand Capital
When it comes to working capital, you want to be able to tap what you need without paying overhead costs just to keep extra reserve cash on hand. That means getting advances that are tailored to your exact needs when you use most financial products, but with credit lines you have the option to take out just what you need at the moment, leaving the rest of the balance for later. The result is a perfect fit for your needs every time, without ever having to worry about being over or under-funded.
The best part is that your credit line remains reusable as long as the account is in good standing. There is a maximum balance, but you can always draw any unused balance if you’re current on payments.
Interest-Free Cash Advances?
Lines of credit are also the only short-term financing option that gives you the opportunity to get brief cash advances for no additional financing cost. That is because there is typically a short grace period before interest is assessed, usually around 30 days. If you take out an advance and then pay it back during that window, no finance charge is assessed. There aren’t a lot of opportunities to borrow money for free, but managing your cash flow with credit lines means being able to pay with credit and then use your income to pay the balance down, so it’s likely to work in your favor fairly often.
Improve Your Credit Score and Supplier Relationships
When you have a credit line to take care of your outgoing costs and you use your income to keep it paid down, you have a working budgetary mechanism that lets you send payments to suppliers on time all the time. On top of that, the cyclical borrowing and repayment cycle on the credit line helps build your credit score by maintaining an unsecured debt in good standing. Both of those things make it easier to get price breaks and additional forms of credit, and that is why so many small businesses opt to use them.