Business Lines of Credit
Whether you’re in business or brand-new to any industry, you know that cash flow is one of the most important things that you need to deal with on a day-to-day basis. Of course, entrepreneurs generally want to focus on what they enjoy doing, be that writing, web design, video production or any one of a number of things that they base their business around. However, there comes a time when you’ll need to look into alternative methods of finding capital, either for new equipment so that you can do your job faster, or to perhaps hire new employees or rent your first office space. In cases like this, it’s best to consider first how much you can pay out of business profits and then to consider the various loan instruments that are available to you. Of course, what is available to your business will depend largely on the type of business you have, your cash flow, and of course your business’ credit. However, one common option is our business lines of credit.
Business lines of credit are in some ways better than the traditional loans or even than business cash advances or credit cards. The reason for this is that lines of credit can be used for anything related to the business and often have lower interest rates and more flexible repayment terms. This is the same reason personal lines of credit are generally favored over getting high-interest credit cards. Of course, if it’s a smaller version you’re thinking of, you may want to get a loan or a low interest credit card rather than going to the idea of getting a business line of credit. Or, you might be wondering is whether or not you should look into getting business lines of credit in the first place.
Although the temptation, especially if you’re just opening your business, would be to get this financial tool in order to get the most advanced tools, software and training, you will first want to think of your cash flow. If you’re brand-new to your business, then you likely will not have built up a steady client base and, as such, will lack profits. In a case like this, the best idea is to use what you have already terms of equipment and knowledge. When you are more firmly established, you can get the more advanced business tools. Although this may seem like doing things backwards, in fact, it can do two things.
It trains you to be creative in terms of both getting your work done and in handling your finances. While you may not have the most up-to-date equipment, you avoid putting yourself in debt before you have enough clients to pay for what you really need. While you may think that this will put your disadvantage, especially if your competitors already have most of the advanced equipment, consider how it promotes your creativity. You can focus on excellent customer service and products, regardless of your equipment.
When you’re looking at business lines of credit, business credit cards, business loans or any other type financial tool that will potentially put your business into debt, first see if you can get just the amount that you feel that you require. Remember that banks and lenders are always looking for ways to give you more than you may actually need, even if it is lent at a good interest rate. Remember that these lenders and credit unions are also in business – and their business is loading out financial tools and interest rates which profit their shareholders. While there’s nothing wrong with this, if you can negotiate with them to get just what you need, you will find it easier to pay back the loan. You will also help protect yourself from being tempted to spend the excess on anything frivolous.
Remember that any lines of credit you get for your business are simply another form of bank loans for businesses. They will still have an interest rate and you’ll still be negotiating a monthly payment as well as other terms. However, business lines of credit are typically in larger amounts than bank loans and, in some cases, can only be applied for if you meet minimum standards.
In addition to business credit cards and business cash advances, there are also SBA loans to consider as an option as well. Of course, there are several things to think about before you look into getting business lines of credit. For one thing, you not only need to determine how much you think you need as well as a payment plan for prompt repayment. You also need to look at your overall business plan and really decide, based on numbers and not on emotion, whether or not the time is right for you to take advantage of one of these tools. This is something that can only be done properly by looking not only at your current business finances as well as expenses, but also at the short- and medium-term plans you have for your business. If you find that you are at the point where you need to use business lines of credit to further your business ambitions, and you have the capital (both current and future) to be able to pay it back, then this is something that you will definitely want to go out and get.
But what if you don’t have those finances? In that case, you may be in a situation where you absolutely do need new training, software or equipment. You may not quite have the funds to buy it outright, but you’re also not sure if your business can handle a large business line of credit, online or otherwise. What you need to do is take a good, hard look at how you’re going to pay the line of credit down once you get it and immediately start making a solid plan that you put into effect even before you apply for the loan. This is something that business owners can sometimes forget about, simply because they want to be able to compete in an often changing marketplace and, as such, are driven to potentially buy things that they may not yet be able to afford. This isn’t always a bad idea, just make sure that you have a plan to get the necessary funds together over time so that you don’t fall behind and risk not only your businesses credit, but your reputation and your business’ name. The last thing you want, especially if you’re a start-up, is to have a bad name among your local lenders.
Of course, this is assuming that you go with one of your local lenders to get the line of credit that your business needs. However, there’s another option that you would probably want to consider as well: that of business lines of credit online. One thing to remember is that while most business owners will tell you that they prefer to deal with lenders face-to-face, more and more businesses and people are finding out that getting loans and lines of credit online is faster and, in some cases, easier for both parties than it is to go the regular, physical application route. Consider for a moment, however, that when you’re researching lenders that are local to your business, it can be a much faster process than trying to research all the different lenders that will find online. One of the best things to do in this case is to start by having a plan for not only how much you need but what terms you’re willing to agree to. By doing this first, you’ve actually done a lot more research than you would think. This can weed out very quickly any lenders that do not meet your specific criteria and, best of all, you don’t actually have to talk to anybody to do this. Because you are getting a line of credit for your business online, you may find that you’ll be able to actually get terms, interest rates and versatility that would be impossible at a physical office. Applying for a business line of credit online can also be quite a bit faster than it would be to fill out forms the normal way. With the advent of technology that allows you to store your information and then fill in a form with one click, you’ll be able to very quickly apply for any loan you need. And because there’s so much competition, you can actually have an easier time finding exactly what you want from lenders online. True, you will have to spend little bit more time researching to make sure that the company is one you want to deal with, but you have much more choice than you would be if you limited yourself to lenders in your area.