Learn the Benefits of a Business Credit Line

Lines of credit are important tools for businesses and sometimes individuals who need to manage cash flow without interrupting the regular rhythm of their operations. They work a lot like credit cards in many ways. You can draw on them whenever there’s an open balance, interest rates are a little higher than you’d see for term loans, and you need to repay a balance before drawing more if you hit the maximum. They’re also a lot different from credit cards because you can draw cash from them, usually in the form of a direct deposit to your business checking account. This lets you use them to tap into working capital whenever your cash flow is coming up short.

Extend Payment Windows

One of the biggest advantages to using a credit line over another form of cash advance is the grace period. Most credit lines do not charge interest for the first 15 to 30 days, depending on your credit agreement. That means if you need to make an outgoing payment and you expect to see the funds to cover it in less than that time, you can borrow without paying any interest at all. This is an especially good deal if you’ve got a line that doesn’t charge you any monthly or service fees, because it’s essentially borrowing for free.

Load Up on Inventory

One of the biggest limitations retail and entertainment businesses face is their ability to load up on inventory before an anticipated sales boom. Local events, holidays, and seasonal demand are all opportunities to take in big profits if you’re prepared and you know your peak sales capacity. Lines of credit make it possible to maximize your inventory going into those periods. When your business grows enough to tap into a large enough balance, it might even cover the costs of temporary additional staff during those periods. It all depends on your income and business credit report.

Gain Working Capital on Demand

There’s a lot more you can do with a credit line because of its flexibility and accessibility. Many new lines are approved and made available in less than a week, and once you are up and running, you can tap into your available balance on demand. It’s a good idea to look for a lender who makes it easy to reassess your limits as you grow your business, too. That way you’ll always have the right ratio of accessible capital to income. After all, the bigger your business, the more working capital you need to be competitive.

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