Financing a business might seem like a challenge, but doesn’t have to be. In fact, there are many types of credit lines for small business owners to consider.
Because your goal should always be to protect your company’s interests, not to mention ensure fiscal solvency, you should understand the pros and cons of the best lines of credit for small business.
Below are some of the top types of credit to fuel entrepreneurs’ dreams.
Business Credit Cards
A corporate credit card offers you the chance to buy items and pay for them monthly per the credit issuer’s terms. If you only need to make small purchases for your company, a credit card with an acceptably low interest rate could make sense. On the other hand, if you plan to invest in large, expensive equipment and furnishings, a credit card is typically too small of a line of credit to consider. Remember that you’ll be expected to pay off the minimum amount on any credit card every 30-day period, or your credit rating could take a hit.
Revolving Lines of Credit
Many financial institutions will offer businesses a revolving line of credit. Essentially, the bank gives your company the opportunity to use the available credit line as needed. For instance, a bank may offer you a revolving line of credit up to $150,000. This means that you can use up to $150,000 and pay it back in pre-arranged installments. However, unlike a credit card, a revolving line of credit may offer larger financing amounts. For this reason, these types of lines of credit for small business owners with high-dollar needs are preferred. At the same time, never forget that small business line credit requirements of this kind generally expect you to have good to exceptional credit scores.
Small Business Loans
Like a mortgage, a traditional loan can be a small business’s best friend. The loan is paid off as a lump sum, giving you the entire payment upfront with the understanding that you’ll pay it off over a long period of time. If you need money immediately and you have excellent credit, this may be a good choice. Still, it isn’t for every business. It can be tough to get a loan without a solid plan of action, history of paying off creditors, etc. Additionally, you don’t get to use a loan like a revolving line of credit.
Final Thoughts on Business Credit Lines
Obviously, each small business needs to make line-of-credit decisions based on its particular requirements. Be sure to always take small business credit line rates and expectations into serious contemplation before choosing a specific model for your operation. Ask other small business owners what they prefer to help you come to a satisfactory conclusion.
No matter what type of business you’re going to launch, you have plenty of small business credit line types at your fingertips. With a little forethought and due diligence, you’ll pick the perfect one to help reach your objectives.
