3 Benefits of a Line of Credit For Your Business

Having enough cash on hand is always difficult when you’re running a small business. Expenses can arise quickly, and so can downturns. If you’re not careful, you may quickly find yourself in the red, unable to pay back debts and contemplating difficult decisions.

There’s no universal solution to this problem, and of course, your best bet over time is working to build a strong and sustainable business. But in the short term, having cash to draw on is always helpful.

For that reason, lines of credit are an important tool to consider. Lines of credit offer borrowing flexibility, which can be enormously helpful to a small business. Read on to better understand some benefits of a credit line.

1. Flexibility in Borrowing

First and foremost, lines of credit offer flexibility. Most lines allow you to borrow up to a set limit, which will then “recharge” once you pay it back. Also, lines can either be secured or unsecured, meaning backed by collateral or not. Secured lines tend to offer better rates, but unsecured lines may be easier to obtain.

Whatever type of line of credit you use, the ability to have cash on hand when you need it is essential. You may go months without needing to draw on it. But when an expense comes up — a need to complete urgent repairs, the need to cover payroll, the need to buy more supplies quickly — the money will be there.

2. An Improved Fiscal Profile

Lines of credit can also help in another way: they can help to boost your business’ financial reputation. Businesses build up credit, just like individuals. Steady borrowing and repayment of a credit line can help you maintain that credit. Even if you don’t need to use your line of credit for substantial purchases, regular borrowing and repayment can be a great way to keep your credit profile looking great.

3. Way To Make Connections

Credit lines come in all shapes and sizes — some offer more, some offer less, some offer better or worse rates, and so on. Whatever you choose, establishing a credit line can help deepen your relationship with a particular financial institution. This can be helpful because there’s a good chance that over the long run, you will want to take out more substantial loans. Having an existing relationship with a bank or credit union can help you when the time comes.

In short, a credit line can be a boon to almost any business, and it is worth considering what it can do for yours.

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