Cash is to your business, what gas is to your car. If a business runs out of cash, it comes to a standstill regardless of the amount invested into it initially. Of course, there are multiple options in the market to procure cash, but most of them are not feasible for small businesses. Banks may offer loans, but it is a one-time solution. A business needs something that will ensure a steady flow of cash at a cost that is easy to bear. This is where a business line of credit comes to your rescue.
Business Line of Credit
A business line of credit is different from traditional bank loans, that give a lump sum amount and charge interest on the whole amount from day one. In certain situations, you may not be allowed to take more loans till the time you repay the earlier one. Typically, loans are taken for a one-time requirement such as procurement of land, machinery, expansion, etc. They do not fulfill the need of working capital, which is required to keep the business running on a daily basis.
A business line of credit creates a certain predefined limit that can be utilised as and when required. You are supposed to pay interest only on the amount utilised. Unlike traditional loans, the amount repaid to a business line of credit can be utilised again if the need arises. As long as the upper limit of the credit line is not breached, you can use and reuse the amount as many times as you want.
Business line of credit, also known as revolving line of credit, may be offered in lieu of certain asset(s) of same or sometimes more value. This is called collateral. Property, inventory, machine and equipment, invoices, stock, etc. are accepted as collateral for a secured line of credit. Providing collateral sometimes makes it easier to procure funding and may also mean a reduced rate of interest.
However, small businesses or start-ups do not always have an option of offering an asset as security. For such businesses, lenders create a line of credit without the backing of collateral, called unsecured line of credit. An unsecured business line of credit is created based on past performances, turn over, and bank statements. Lenders may charge a higher rate of interest and have additional terms and conditions such as lower credit limit or signing a personal guarantee for an unsecured business line of credit.
Also Read:- 7 Reasons why you need a business line of credit
How does unsecured business line of credit benefit your business?
An unsecured business line of credit can really boost your profits if used smartly. The cost incurred in the process is justified by the numerous benefits of this arrangement. Here are a few ways in which unsecured business line of credit for small businesses is a perfect solution.
- Use for short-term recurring business needs– LOC’s can be used for taking care of working capital needs such as purchasing stock or equipment, expanding the business to new locations, renovations, paying salaries, and overheads or marketing and advertisements.
- Does not block asset or capital– Your physical assets or cash is not blocked in business as security. This reduces the risk on your personal assets in case something goes wrong in the business.
- Convenient– You don’t have to undertake the tedious task of applying for a loan every time you need cash. A limit is readily available for use whenever the need arises.
- Affordable– An unsecured business line usually spreads over three to twenty-four months with affordable repayment options which are easy on the pocket.
Read this blog: How to prevent fluctuations in your business?
Hubbe- A preferred choice for business line of credit in Australia
Hubbe has emerged as the preferred choice for business line of credit in Australia. With hassle-free and fast processing, you are assured of best assistance right from the beginning. Minimal paperwork, faster approvals and funding, affordable interest rate and fees, and no requirement of security are some of the features that make Hubbe stand out in the industry.
Hubbe also specialises in business line of credit for small business. It offers funding within 24 hours of approval, daily or weekly repayments options based on cash flow and funding from as low as $5000 to $500,000.
You have worked hard for your business. Don’t let small roadblocks dampen the dream.
Apply for an unsecured business line of credit and take your business to the next level.