Business Line of Credit – Help Your Small Business Sail Through Tough Times
Published on 2020-09-25
Category: Business Loans, Small Business Owners
The global pandemic has unleashed havoc on economies across the world. Understandably, in such times of crisis, it is difficult to keep calm and remain optimistic. However, by taking proactive steps, you can take your business on a recovery path, maintain it in a secure position, and also ensure a steady growth once the crisis subsides.
As markets start reopening and businesses restart operations, it’s crucial to have funds to manage a comeback and recover from the losses.
How does a business line of credit help?
Essentially, a Business Line of Credit (LoC) is a preapproved loan made available to you for a specific period that you can access to your business. Any amount within the given limit can be obtained multiple numbers of times. The interest amount is paid only on the utilized amount while the balance funds are available to you for future use as and when needed. Once you have a pre-approved Line of Credit, you do not need the approval of the lender every time you use it.
LoC loans are shorter period loans. This means that the amount is pre-approved for a fixed time duration during which you can utilize these funds. Post the time frame, the offer lapses and you will need to renew by applying once again, if needed. The primary advantage of this loan type is that you can avail only the amount you require at any time and pay interest only on the amount you secure. Business Lines of Credit are not intended to fund purchases such as a house or a car as they can be availed through mortgages and auto loans. They help smoothen out the ups and downs of businesses with the help of cash flow.
What are the Advantages of LoC loans?
The interest charged on the LoC is usually lower as compared to many other small business loans.
Line of Credit Loans can be availed several times within the limit without any restraint on individual withdrawals.
These loans are cost-effective and reduce the burden of interest as the interest needs to be paid only on the amount withdrawn and not on the entire amount sanctioned.
Ready cash for small business funding is available as per need.
It is suitable for small businesses that have been in business for longer than a couple of years with a steady turnover. Business owners have financial needs that fluctuate from time to time. A business Line of Credit allows them to manage the challenges of running their business.
These funds are used for immediate business expenses like cash flow, working capital, buying stock, or pay off employee salaries.
How Can Small Businesses Use LoC to Their Advantage during tough times?
COVID-19 has impacted small businesses across the world. With so many businesses disrupted by COVID-19, having a steady cash flow has become imperative to stay afloat. Business LoC is the credit line that can be utilized by small business owners to tide through the tough times as:
It allows for a more controlled use of capital. Thus, one can manage the funds in a more planned way as compared to traditional loans.
Depending on the creditworthiness and the need of the business owner, a higher loan amount can be availed.
Commonly called as revolving credit, LoC loans for SMEs allow continual access to funds for a growth-driven business. This comes into effect because a lender offers access to a certain amount of capital for an unspecified period.
A Line of Credit is an effective funding strategy for keeping complete management and control of your business without investors’ interference. It can be used where credit cards do not help. Flexibility is the buzz word as far as a business line of credit goes.
Broader and flexible repayment options allow for navigating through the ups and downs of business with ease. It can be used to balance the fluctuations in the income of the business owner.
You can use the loan to cushion the financial paying capacity of your business, whether it is to maintain stocks, pay employees, and cater to market fluctuations.
A crisis can have as much impact on your workers as they do on your clientele. It’s critical to ensure you have the funds at your disposal to fulfill your duties to them.
It is a prudent measure to ensure you have adequate funds for a sustained period and access to those funds.
What is the Key Takeaway?
In normal times, a small business loan can help fuel businesses to start or to expand. But during tough times such as those caused by the pandemic, an LoC might be the right choice to help you keep your business running.
Whether you need a recovery boost or a cushion against the emergency, a Business Line of Credit can help. Line of Credit provides you with funds whenever, for whatever be your need, making it an excellent financial strategy for small business funding. You can always take help from our LoC experts at https://www.capitalboost.com.au/ to get the best for your business needs.
Tagged in: Business Line of Credit, Advantages of Line of credit loans, Line of Credit Loans, Small Business Funding, LoC loans for SMEs, Preapproved Business Loan
Published on 2021-08-05
Why is working capital imperative for small businesses?
Small and medium-sized businesses have shut down, re-opened, found it difficult to employ staff due to lack of applicati...
Published on 2021-05-05
How to compare your business loan interest rates?
Comparing a business loan and getting the best interest rate is essential for your business's financial well being. Here...
Published on 2021-05-05
Funding your Solar Business in Australia
Every business needs finance & the same applies to a solar business. It can become difficult to expand a solar business ...
Call our experts on 1300 360 530, or