Charles Spinelli Lists a Few Major Benefits of a Business Line of Credit
Business lines of credit can be quite useful in building business credit while improving cash flow. Lines of credit generally have a shorter repayment period than a loan. As Charles Spinelli mentions, business lines of credit are particularly useful for smoothing out business cash flow or for making the purchases necessary to keep a business running. They can also help establish business credit and build a relationship with the lender, which can be helpful when applying for new funding down the line.
Charles Spinelli highlights a few benefits of business line of credit
No matter whether one is an entrepreneur starting a brand-new venture or has been running a business for quite some time, it is important to smartly manage the costs of day-to-day business operations. Expenses associated with business supplies, payroll and inventory are consistent. Moreover, there are also certain types of unexpected expenses that may crop up any time. Seasonal fluctuations are also not always predictable, and business owners might require urgent funds to meet their short-term needs. This is where the business line of credit comes in. It makes the necessary financial resources swiftly available and can help balance the ebb and flow of business cycles.
In case of business line of credit, interest is not generally charged on the part of the line of credit that is unused, and businesses get the flexibility to draw on the line of credit at any time. It can also be used as an overdraft line of credit and allow business owners to seamlessly manage cash flow. The benefits of a business line of credit are many, including:
- Flexibility of usage: A closed-end loan is generally used for funding a specific purpose, like buying a piece of equipment. A business line of credit provides higher degree of flexibility and can be used for a number of purposes, like covering payroll or buying inventory. This provides entrepreneurs with the freedom to decide what to spend cash on for the company.
- Access to cash on demand: As opposed to a traditional loan, a revolving credit line allows entrepreneurs to source funding before their business actually needs that money. Owing to the cyclical nature of business, it would be smart to have funding in place to take care of its discerning short-term needs. Getting the freedom to access funds on the credit line at any time can help keep a business running in a smooth manner for the long term.
- Flexible payment terms: Traditional term loans have set monthly payments. Making these payments can be challenging for start-up businesses and can even hamper their growth prospects. A revolving credit line, on the other hand, provides flexible repayment terms. Moreover, unlike a term loan, if a business has a slow month, it can simply pay the minimum amount due.
As Charles Spinelli mentions, using a business line of credit allows companies to build a positive payment history that appears on the business credit report of the company. This would make it easier for the company to potentially obtain future credit based on the creditworthiness of the business.