Is It Time for Your Business To Open a Line of Credit?
If you have a business that is thriving but experiencing bumps in the road due to cash flow issues, it’s probably a good idea to consider a credit line as an addition to your financial toolkit. They are seldom the only kind of financing a company needs, but they are also invaluable, and most companies rely on them as cash management tools even when they don’t strictly require them. That’s because business lines of credit come with features like interest grace periods, revolving balances, and flexible payment structures to help you get the most out of them. They can help extend your ability to pay when you are waiting on invoices, but they can do a lot more than that if you know how to use them.
Revolving Credit Lines and Financial Streamlining
On top of the extension to your cash flow when you await payment, credit lines can also provide you with the means to keep doing business as usual during seasonally slow periods. It’s not uncommon for companies to have periods where they operate at a loss predictably, then periods where most of their profit is made. The right reusable credit tools can help ensure you have the reach to restock your inventory before things get busy again. They can also help you add in seasonal staff without tapping into your reserve cash by allowing you to access funds for the first couple weeks until your sales boost you back into the black. Most importantly, though, they can help you pay your regular suppliers and vendors for the brief periods where your cash flow goes dry during the calendar year. Most companies have them, it’s just a question of when they happen on the calendar.
How To Get Business Lines of Credit
Lines of credit are open to a wider range of companies than most traditional business loans, and they typically don’t require long applications or financial disclosures. They do usually require some proof of income and current assets, as well as a credit check. Credit lines are approved based on a combination of your company’s credit score and its annual income, so if your score does not exist yet, you may need to find an entry-level industry participant. The other option is to establish credit by requesting your vendors and utility companies report to the credit bureau when you pay. This can build the payment trail that allows you to get business credit established if you can’t access a provider who works with brand new companies. It’s also a good way to raise your score if it has recently dipped.