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How You Can Benefit From a Business Line Of Credit

All entrepreneurs agree that it is not very easy to meet the financial needs of a small business.  You know your enterprise is at stake when your reserves are too little to cover an unanticipated bill or buy vital inventory. And the effects of inadequate finances run deep into the personal lives of the victims, according to research by The Firmament Group. The 2018 study found that 51% of company owners worry about access to funds no less than once per week, while 41% admitted it had kept them awake at night in the previous month.

That's why you should secure a line of credit for your micro-business. It gives your company access to a banking institution's deep pool of funds. A line of credit can always hold the fort for you as long as you use it wisely.

What a business line of credit is

With this product, a lender assists you with a fixed amount of funds to help you finance operating expenses like payroll. Business lines of credit are either; unsecured, or secured. Unlike secured lines, unsecured lines are not protected by an asset. Lenders who offer secured lines want the guarantee they’ll get their money back.

You are free to pull out any amount you need up to the predetermined cap, and whatever you borrow is considered a loan. The settlement structure depends on your lender’s terms. In most models, you’ll be required to pay in either weekly or monthly installments throughout a few months or years. After fully repaying your loan, the line slips back to its original limit. Most times, lenders review line of credits yearly to check them for renewal.

One benefit of a line of credit for business is that they only charge interest on the borrowed amount. Therefore, if the line is $50,000 and you've pulled out $25,000, the untouched portion of $25,000 won't cost you anything in financing fees.

But that is not to say the lines are free. The product comes with several other costs. Financing institutions sometimes charge fees to open a business line of credit, make each draw or maintain it per year.

To tap these finances, one can transfer the amount they need from the line to a checking or savings account either online or by phone, or using their lender-issued checking or debit cards. You can also extract cash from a nearby ATM, but at a 2 to 3 percent fee payable to the lender for the advance.

Wrapping Up

Business lines of credit like merchant cash advance bad credit or any other product should be used wisely to avoid accumulating debts that may threaten to ruin your micro-company’s bottom line.

Author Bio: As the account executive, Michael Hollis has funded millions by using business funding merchant cash advance bad credit solutions. His experience and extensive knowledge of the industry has made him finance expert at First American Merchant.

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