Do I Need a Line of Credit?
Many companies secure a line of credit to help finance operational expenses, like supplies, payroll, or inventory. But if a company is completely self-funded and debt-free, is a line of credit really necessary?
The short answer is yes and here’s why.
A business line of credit is a flexible line of credit offering the ability to access funds when needed and repay over time. Interest is only paid on the borrowed amount, so you aren’t paying interest on unused funds. For a business, a line of credit serves as a perfect safety net for any unforeseen expenses or challenges the business might face. If you don’t need it, you don’t have to use it. But if you do require funds, a business line of credit provides immediate access to capital, has a quicker approval cycle than a short-term loan, and remains open until you close the account. With a short-term loan, when the loan is paid off, the debt is cleared. With a business line of credit, you have the flexibility to replenish your available capital over and over.
A line of credit offers more control of your capital and gives your business more financial freedom. You can use the credit as you see fit—whereas with a loan, you are required to adhere a specific use for the funds. Need money to cover payroll? Have an emergency you need to resolve? Need more supplies or inventory? Want to cover expenses as you expand? A line of credit can be used to fund any of these business costs.It allows you to tap your funds as needed, then pay back when you are able. You can choose exactly how much money you want to take and when you take it.
As a self funded company, a line of credit will help accomplish three important things: improve the business credit score, open doors for preferred interest rates as your business grows and decrease the temptation to buffer the business with personal funds.
To help determine the right kind of funds to best serve your business needs, contact your local lender of choice or visit www.thefundinguniversity.com for more information.
