Are you looking to purchase inventory? Or are you worried about your poor cash flow? Well, a business line of credit can to help your business by allowing you to draw money from a pool of funds to help you cater for a variety of business needs. The following are the pros and cons of a business line of credit;
Applying for a business line of credit is generally easy. You can submit your application over the phone or online and wait for your loan to be approved within 24 hours at Hubbe. This saves you time and helps you cope up with urgent demands.
In the event of unexpected business expenses, a business line of credit can chip in to settle your outlays. Commonly, prices of equipment fluctuate; hence, you may be forced to dig deep into your pockets to get the best equipment for your company. With a business line of credit, you don’t have to worry about compromising your day-to-day business operations as there would be a viable financing back-up. Most business owners prefer this type of financing over others because of its reliability.
You only pay interest on the funds used
Since a business line of credit allows you to access funds whenever you need to, you only have to pay interest on the funds drawn. This saves you the burden of paying more interest on the funds you haven’t used. Having planned adequately, you can borrow only a near precise amount of money you need for a specific business purpose after which you can repay it and further replenish your credit limit.
Can help you build your credit score
A business line of credit could help you build a good reputation, which can be a plus when applying for other sources of business funding. When you repay your funds in time, you improve your credit score considerably. Lenders usually look at the credit score of their borrowers before deciding on whether or not to offer them a loan.
Can be used for any business purpose
The ability to use your funds for any business purpose can be gratifying. Primarily, this is as a result of the changing operational demands within a business environment that need to be fulfilled. You can use a business line of credit to purchase pricey equipment, streamline and track your business, have a great capital control, beat short-term cash flow gaps and counter sales slowdown anytime.
Bad credit is acceptable
You may still qualify for a business line of credit despite having bad credit. Typically, a bad credit means that you haven’t been paying off your debts in time. Some lenders would still be willing to offer you credit in spite of your low credit score.
Read Related Blog: 7 Reasons Why Every Business Owner Needs a Business Line of Credit
Lower credit scores may attract higher rates
In spite of qualifying for a business line of credit, you may have to pay more interest compared to borrowers with good credit. Lenders usually charge higher interest to individuals with bad credits to compensate for the risk of defaulting.
May require security
Some lenders may need security to offer you a business line of credit. Commonly, this case may apply if you are having a bad credit score or you need a large amount of credit loan. To protect themselves from the risks associated with the inability to repay the loan, they would need you to provide security. Giving out your asset details can subject you to an unnecessary panic of losing it in the event you default on your loan repayment.
May require updating of documents
Sometimes, lenders may need you to update your personal details before allowing you to reapply for a business line of credit. This may be aimed at enhancing their services and ensuring that only the right people access their loans. It can be cumbersome to supply your lenders with documents every time you need to access a loan. Furthermore, this may turn out to be more frustrating in cases of emergencies where you need to access funds urgently.
A business line of credit can be a more effective way to finance your small business since it boasts many benefits. Why not give it a try?