Lines of credit that are available to small businesses are very much like having a credit card, as opposed to applying for a business loan. A business loan would provide you with a lump-sum disbursement which you could use for any business purpose, but lines of credit don’t operate that way, because there is no lump-sum involved. Instead, the recipient of business lines of credit would have a maximum balance available to them, and this could be drawn on at any time, and repaid monthly so that the balance can be restored.
How of Lines of Credit Work
Having a business line of credit will give you access to short-term funding, and that will help you to cover day-to-day business expenses like payroll, inventory acquisition, and purchases of supplies. If your business is a seasonal one, having a line of credit can get you through those down times until business picks up again during your busy season.
Lines of credit are not generally used by small businesses for a specific purchase or for any single reason. Instead, it’s a very flexible source of funding that can be used to cover any number of business needs. The great thing about using lines of credit is that you have the opportunity to repay some of the money you have drawn out against your balance each month.
This will in effect, restore that balance so that it remains available to you on the next occasion that you need it. Very much like a credit card, you can use your business line of credit for virtually anything, and it will always be there as a source of funding, as long as you repay some of the money you’ve drawn out each month.
Would Business Lines of Credit Help Your Company?
Most businesses would benefit significantly by having the flexibility of business lines of credit, especially to cover gaps in cash flow. Contact us at Pendleton Commercial Financing if you’re thinking of applying for a line of credit.