It is not unusual for start-up companies to encounter difficulties in managing cash flow. Time gaps and seasonal demands are often contributing factors to the discrepancy between capital needs and obtaining revenue. Without enough working capital, cash flow problems could result. Many small business owners end up closing down their companies because they run out of cash.
If you are worried about being caught short of funds, a business line of credit may be the perfect option for you. Here’s why:
1. Manage Seasonal Ebbs and Flows
Small businesses whose cash flow varies depending on the time of month or year need capital to get them through these slower periods. A business line of credit accommodates the seasonal ups and downs of your cash flow. Moreover, a business line of credit allows you to make purchases ahead of your future sales, so you won’t end up stuck in a rut!
2. Increased Flexibility
A business line of credit gives you access to money when you need it and in the amount that you need. This may be more convenient for some small businesses that would prefer not to get all the money at once in a lump sum (the way traditional small business loans work). With a business line of credit, you can use the money when you need it and pay it back when cash flows into your business.
3. Higher Likelihood of Qualifying
Business lines of credit are generally granted to new small businesses more swiftly than traditional loans are. You will need to prove that your small business’s earnings will be consistent and that you have multiple ways to repay the money, but you will generally agree on a time period during which you can repay and re-borrow. Biz2credit can help you out with the application process and match your small business with the best options available.
4. Only Pay Interest For What You Use
It is difficult to predict the degree of a “seasonal low,” so you may be thinking that term loans are impractical for your small business. Luckily, if the term loan gives more money than you need, a business line of credit allows you to only pay interest for the portion of the money that you use.
5. Save When Buying In Bulk
Many wholesale distributors offer nice discounts to small business owners who have a business line of credit. When you end up using your business line of credit as working capital, your small business’s bottom line immediately benefits.
This article was originally published by Biz2Credit