Let’s face it. No matter what products or services that your business sells, maintaining a positive cash flow is an ongoing process. Especially in this era of pandemics and economic downturns. You will constantly require funds to tide you over during one of these spells, and few things solve this better than a revolving line of credit.
The Purpose of a Line of Credit: Explored
Whether or not you have managed to rack up savings from your business (and for your business), you still can benefit greatly from acquiring a revolving line of credit. The main utility of the latter is to sustain the company through unforeseen events. Such as the Covid pandemic, for example. It’s also good for events that you can foresee – like seasonal variations in customers and product availability. It helps to shore up the amount of working capital you have available.
Advantages of a Line of Credit
You may think that having a business credit card is just as viable as having revolving credit, but it’s important to delineate the differences. For starters, you can be almost assured that the credit card possesses higher interest rates. Versus the fact that any unused money in your line of credit isn’t charged any interest at all. Furthermore, you needn’t worry about cash advance fees and other similar costs (i.e. balance transfers) with revolving credit. A fact that automatically improves your cash flow metric.
Additionally, since business credit cards are classified as unsecured loan equivalents, you usually need personal guarantees to acquire one. As well as monthly payments that hamper your ability to maintain a solid cash flow. Lines of credit don’t necessarily require monthly payments and are thus better for growing businesses.
The experts at Ideal Financial Group can answer all of your questions on the matter, as well as other business and finance-related inquiries. Drop us a line at your earliest convenience.