5 Advantages of Business Lines of Credit
If you’re trying to find the best balance of credit resources for your small business, it’s important to know about the advantages offered by lines of credit and the things you can do to gain them for your business. Credit lines are flexible, reusable tools, and they often bridge the gap between financing assets for cash flow and taking out small business loans for short-term expenses.
Let’s start with that reusability. Like credit cards, credit lines can be accessed whenever there is an open balance to be used. Once you’re approved, you’re in control of your debt up to the account’s limit, and it’s easy to ask for more credit as your business expands. That means you have purchasing power to keep in reserve for times when your cash flow is tight, and you don’t have to resubmit applications or wait for determinations each time you want to cover a purchase or take out working capital.
That brings us to the second advantage, which is the fact that lines of credit are essentially loan accounts you can make a cash draw on. That gives them a distinct edge over business credit cards even when they are both able to access the same amount of credit, because it allows you to use your credit for the kinds of expenses you can’t put on a card. This makes them incredibly versatile.
Credit lines also tend to have better interest rates than credit cards, even business credit cards, which makes them easy to use and easy to repay, without adding a lot of interest to your bottom line. This is an incredible resource for small companies that might be able to access credit but not small business loans, because it gives them a chance to build a credit rating while gaining purchasing power.
The fourth big advantage of credit lines? Just like credit cards, they often come with a grace period before interest is applied. That allows you to extend your cash flow without incurring any costs whatsoever when you’re going to be able to fully repay the balance within the grace period. Combined with the ability to make a cash draw, lines of credit might be the financial instruments with the greatest ability to extend that cash flow in a cost-effective way.
Do you have any idea what the last advantage of a business credit line is? No? It’s simple. A line of credit gives you peace of mind, because it allows you to know you have resources when the unexpected happens, and that peace of mind is vital when you’re running a small business.