About Business Lines of Credit - Rapid Read

A line of credit can be an ideal funding source for your businesses. With a line of credit, you only pay interest on the amount you borrow, a major benefit that a conventional term loan doesn't offer. Similar to a credit card, a line of credit has a lot of flexibility with usage but depending on what you are looking to fund, it may have some drawbacks.

Why consider a line of credit over a loan?

If your business is in need of funding for cash flow purposes a can be very helpful, if you need funding for a specific large purchase, a traditional loan may be a better option as you will have more time to pay it down in smaller increments. A line of credit is revolving, meaning once you pay back what you borrowed, the cash is available again, instantly, no need to re-apply for funding. This can be leveraged for every day business expenses and help with cash flow. Here are two general examples of where a line of credit would come in handy.

Scenario 1: You sell a product and a customer places a large order and their terms are Net 30 (payment due 30 days after delivery) you need to pay your vendor / manufacturer up front. If you have a line of credit you can tap into it to fulfill the order without having to apply for any further funding.

Scenario 2: It is slow season for your business and you are a few bucks short for payroll, being prepared with a line of credit could help tremendously.

These two scenarios are common and while a line of credit may not be a go-to source for keeping a proper cash flow, there are definitely times where they can save your business from paying high-interest on hard money loans when you need cash quickly. Keep in mind that the occasions when a line of credit is needed most can often be a difficult time to get approved for a loan, getting a line of credit preemptively rather than when it's crunch time is a good idea.

To sum it up, a line of credit is easy and affordable to set up (assuming your credit is good) and can be an incredibly handy resource for your business to have access to.

Finding the right line of credit is made easy by our funding partner Fundera, they can help you find the best Line of Credit for your business quickly, check them out here.

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