How to Choose Your Business Line of Credit
If your business has been successful, you may start to consider taking it to the next level. That can mean expanding your existing operations to manufacture a larger volume of your product or expand your location to reach a larger audience. Whatever you business expansion means to you, when you’re getting ready to grow or expand your business, there are many factors to consider before you get started with applying for a line of credit. There are certain lines of credit that make more sense for certain businesses and if you don’t know which one to apply for you my end up wasting time on a loan that you’ll never be approved for. Before you head to your local bank to apply for a line of credit, know what you need to look for and how you should choose your business line of credit.
What’s a Business Line of Credit?
A line of credit is different from a loan. With a loan you apply for a certain amount and get that entire amount up front, along with a monthly payment and repayment terms. However, with lines of credit, you apply for an open line of revolving credit that is available for you to use at any time. If, for example, you have an open line of credit for $5,000 and you don’t use it during one month, then you wouldn’t be required to make a payment on that loan for that month. Having an open line of credit allows you to have access to your cash when you need it most, offering your business peace of mind.
Deciding on a Line
Before you apply for any lines of credit, you should know exactly what your business needs. If you run a small business, for example, you likely don’t need to apply for an open line of credit for $1,000,000. Doing so could have a negative impact on your business’s overall credit portfolio. Keep your line of credit reasonable to match your business finance needs so you don’t risk overextending yourself. You can also apply for lines of credit with different term rates. If you need to extend your payment, for example, you can ask for a longer repayment term to lessen your monthly repayment burden.
Most businesses will need to consider additional financing at some point. Because each business and industry is unique, it’s important to consider your business’s needs before you move forward with applying for financing. The more you understand your business and its needs, the more likely you’ll be able to secure a line of credit.