The one thing that every small business needs to keep cash flow lasting longer or to stay afloat during tough times is capital. As a small business, capital may be something that’s in desperately short supply. When starting out, your company may find itself faced with plenty of expenses to take care of, whether they happen to be for inventory purchases, employee payroll or the odd emergency that might turn up. For small businesses that have no credit or even bad credit, it may be hard to get funding through traditional sources.
Small business unsecured lines of credit are essential for providing your small business with the capital it needs for both expected and unexpected expenses. In most cases, all that is needed is an upfront fee to establish the line of credit. Like most loans, interest will be charged on the amount that you borrow; this amount varies greatly among financial institutions, so it is best to shop around for the best interest rates available.
Establishing a small business line of credit will do wonders for your future borrowing, as it allows you to build up a credit history that other lenders can reference. All you have to do is use the line of credit when needed and pay it back in a timely manner. With this available source of capital, you won’t have to dive into your personal savings or turn to investors for added infusions of capital.
Reasons for Small Business Lines of Credit
There are plenty of other benefits to using small business lines of credit, as opposed to ordinary loans:
- Your small business can use its line of credit at any time for any amount within the established limit. You can use the entire line of credit the same way as cash. The same interest rates apply whether you use credit or cash.
- When you borrow, you’ll only be charged fees on what your business actually uses, instead of the full amount. That means you’ll only have to worry about what you borrowed instead of the entire line of credit.
- There are no limitations on what you can use small business lines of credit for. If you need to handle unexpected gaps in payroll or business finances, your small business can do that without any issues.
- Since you have the ability to take out only what you need, it may be easier to pay it back as your small business generates more income.
Having a small business line of credit can help grow your business in its fledgling stages. However, unlike any other line of credit, a small business unsecured line of credit is one that that can be used in any business stage and for any reason.