Business Lines of Credit vs. Business Loans

Business Lines of Credit

If you are looking to fund some future expenses, you might need to borrow money to do it. If that is the case, you have a couple of basic choices: you can take out business lines of credit, or you can take out business loans. These both serve a specific purpose. One should not be used for the other one’s purpose. We’ll discuss the reasons to get each, in today’s article.

Business lines of credit should be used for day-to-day operating expenses, and sometimes for emergency cash flow needs. For example, if you have clients that are late on their payments, you might use your credit line to pay your employees on time. Clearly, this is an advantage, having this money on hand when needed. You can also use them as a replacement for petty cash.

On the other hand, a business loan should be used for purchases. You shouldn’t borrow money to pay for operating expenses, or for payroll, unless it is for your first few months of operation. Instead, they should be used to pay for major purchases, such as equipment or property. You should not use lines of credit for these purposes. Although you may be buying specific items, those items do not secure the line itself. As such, you will pay higher interest rates.

So, there you have it. Business lines of credit should be used to pay for day-to-day operating budgets and emergencies. A business loan should be used for major purchases and other long-term obligations.

For more information, go to Business Lines of Credit at http://www.unsecuredbizloan.com/business-lines-of-credit/

Business Lines of Credit vs. Business Loans was last modified: November 8th, 2011 by Amit Kraidman
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