What is a business line of credit?

A business line of credit is a very important source of funding for business owners, which can help you pay bills, manage cash flow, and meet the demands of weekly or monthly payroll. The intent of a business line of credit is to be a short-term loan which helps you meet the operational needs of your business, and to provide you with an ongoing source of funding, while you are preparing yourself for future business growth.

Common uses of a business credit line

Especially in the early years of a company, it will often be necessary to secure funding to meet the demands of daily business requirements. This is especially true if you’re in the retail business and you are obliged to wait 30, 45, or even 60 days to receive payment for goods. There are also times when business is just plain slow, and revenue streams are running so thin they can’t cover business costs. Whenever situations like these arise, cash flow gaps need to be filled in by some other source of financing, and a line of credit fits the bill nicely.

Revolving credit account

A revolving credit account is extremely useful because when you make payments on your line of credit, it has the effect of restoring that amount to your available balance, so that it can be used again in the future if necessary. As long as you don’t exceed the limit of your business line of credit, you can keep borrowing against it, and keep repaying required monthly amounts in order to keep it in good standing.

In most cases, using a revolving credit account is more advantageous for your business than a credit card would be, because the interest rate is generally much less than the revolving credit account. To avoid maxing out your business line of credit, it would be to your advantage to build up your business savings account, so that you don’t have to draw on your revolving line of credit as often. That means it can be waiting there to help you out of financial situations that might otherwise be difficult to recover from.

For more information contact Bull Market Capital: Business Funding Solutions today.

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