Words of Warning with a Business Line of Credit

Business Line of Credit

If you are looking to get a business line of credit, they can be very useful in many ways. However, there are some things you should be aware of and avoid whenever possible. We’ll be discussing some of these pitfalls, in today’s article.

The first thing you should be aware of when getting and using a business line of credit is misuse. If you need to borrow money for long term projects, such as purchasing real estate or the like, you should get a low-interest bank loan whenever possible. These items can be used as security for the loan, which greatly reduces the cost. It can be tempting to use your different sources of borrowed funds interchangeably for ease of use, but be careful to avoid this.

A fluctuating interest rate, especially from missed payments, can be a huge problem. If you are using your credit line without paying off the amount in full each month, you may be in trouble. The proper use of a credit line should be primarily to deal with cash flow fluctuations. An alternative to this would be to use invoice factoring. This is a process by which you sell your income invoices to a third party for a fee. This doesn’t require good credit, but the fees are typically from 1 to 5 percent, which can make it very expensive.

The important thing is to remember that a business line of credit is all about cash in and cash out. It shouldn’t be used for long-term issues. Also, you should strive to pay off the balance in full, or offset the cost with incoming invoice receipts.

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

Words of Warning with a Business Line of Credit was last modified: October 7th, 2011 by Amit Kraidman
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