Many Companies Avoiding Business Lines of Credit

Business Lines of Credit

In our current economy, there is a trend to avoid taking on debt of any kind. Indeed, this trend has not missed the market for business lines of credit. We’ll discuss some of the implications and reasons behind this trend, in today’s article.

Despite huge incentives to banks to provide SBA loans and lines of credit to small businesses, many loan funds go uncollected. This is true even with a large number of banks opting to get involved with the program, despite their reservations about restrictions put in place.

The reason so many companies are opting to avoid business lines of credit is easy. They simply don’t have the money to expand. Many companies are cutting costs wherever they can. In fact, some are cutting employees, if they have to. The interest on credit lines is seen as just one additional expense.

One downside of the trend of avoiding business lines of credit is that many companies are left with no solid emergency plan if things go wrong. Some of these companies turn to more expensive options like high interest credit cards, or merchant account loans, to make up for this lack of funding. This can compound the problem for many companies.

So, what is the solution when people don’t have the money to borrow and expand their companies? Some companies are still doing quite well. If trends continue, we will see a significant shift in who the players are, and which industries hold together successfully in the future. Until then, we’ll just have to wait and see.

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Many Companies Avoiding Business Lines of Credit was last modified: December 16th, 2011 by Amit Kraidman
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