If your company needs funding for general-purpose expenses there are two ways to go about this. You can seek out business lines of credit which act very much like a credit card for your company or you can look for a one time loan in the form of an unsecured loan which you will need to pay back with interest. Both options are appropriate for different circumstances and we will outline which circumstances are best for each below.
Business lines of credit are more appropriate for circumstances where you have a rolling expense which occurs each month and is paid off each month. Example of this would be if you have a company which provides services to customers in which your customers have a set amount of time to repay you without interest. There will be times when you will have cash flow issues due to this if you have too many services out at once without enough income payments. In order to deal with these fluctuations in the cash flow of your company you can use your credit line to pay for some of your expenses and then pay it off when you are paid by your customers. Used correctly you should be able to borrow against your credit and repaid within the grace period which means you would not have to pay any interest. This is the best use for this type of loan.
Unsecured loans are more appropriate when you are attempting to make a number of minor purchases or some type of major purchase which is not naturally lends itself to a secured loan. Certain types of items cannot be secured due to not meeting the requirements of most banks. Old properties and certain types of equipment fall within this category. The reason you would want to use a loan as opposed to business lines of credit is that you will have a slightly lower interest rate. As you will only need this money once and you will pay it off as soon as possible this will be the cheaper option. It is not cheaper however to use this technique to pay for your monthly expenses as you will need to borrow enough to pay for several months and will likely accumulate interest during repayment.
This concludes our discussion on the best use for business lines of credit and for unsecured loans.