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The Pros and Cons of Lines of Credit
Sometimes, your business is short on cash right when you need it most.
It might be that a supplier is selling inventory at a discount, and you want to take advantage. Perhaps you have a potentially lucrative project sitting in front of you. Or maybe you need emergency cash to repair or replace old equipment.
A business line of credit is an excellent solution for any of these situations. They work like credit cards. You can borrow up to a specified limit whenever you want. You then must make at least the defined minimum payment each month — although you should strive to pay it off in full to avoid interest.
At Fundvisor, we’ve helped many small business secure lines of credit that have helped them grow. However, we want you to be an educated borrower. With that in mind, we’ve listed the pros and cons of credit lines below. If, after reading this list, you feel that a credit line could aid in your business growth, contact us.
The Cons of Lines of Credit
- Interest Rates
Credit lines have high interest rates. This shouldn’t be a problem if you use your credit line wisely. However, if you rely too heavily on your credit line, you’ll pay a fortune in interest.
- Credit Limits
Lines of credit borrowing limits are much lower than term loans — but they’re still greater than business credit card limits.
- Requirements
Credit lines are difficult to qualify for. You must have a strong credit score, robust cash flows, and, in some cases, collateral. Younger businesses may have a tough time getting a credit line, but Fundvisor can help.
- Time-Consuming Application Process
Credit line lenders ask for a lot of documentation before extending you a credit line. Most entrepreneurs don’t have time to assemble this information. Fortunately, Fundvisor can handle this entire process for you.
Is a Line of Credit Right For You?
A line of credit could be just what your business needs if you have excellent personal credit, and your business generates healthy, stable cash flows. Your credit line can offer you access to new opportunities that may not be obtainable with cash alone.
However, you can never be 100% certain that a credit line is the ideal funding solution for your business without speaking to experts. At Fundvisor, we’ll analyze your balance sheet to determine if a credit line is right for your business.
If we think a credit line works best, we’ll find the best lender for you — and we’ll even handle the application process. Time is money, after all, and your time is best spent in your business.
Schedule your free 30-minute consultation with Fundvisor today.
Fundvisor is here to help if you aren’t sure which short-term financing source is right for you. We’ll deal with the paperwork and phone calls for you so you can get the funding you need without wasting valuable time.
Helpful Tips & Information
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