Charles Spinelli: Benefits of a Business Line of Credit

 

images.pexels.com

Charles Spinelli: Why Use a Business Line of Credit

Companies can apply for business lines of credit at traditional financial institutions. Once they qualify, they have access to the funds up to their credit limit. For instance, if a business needs funds to buy equipment or make payroll, it can borrow against the credit line and pay interest only on the borrowed amount.

Benefits of a business line of credit

Poor cash flow is the main obstacle to business growth, and it's one of the leading factors in business failures. Charles Spinelli notes that a business line of credit can provide the funds to help address financial problems that could limit a company's success. For instance, office equipment needs replacing, or clients pay late. The stress of trying to meet financial obligations can take its toll on the business.

With a business line of credit, companies can manage their cash flow. Owners can make confident decisions because they have access to funds when they need them. For instance, credit lines can also help:

• Launch a new product
• Purchase new equipment
• Open a new office.

A business line of credit can protect against disruptions that affect day-to-day operations. It can also help a business by offering the following:

Improved flexibility

The funds from a business line of credit revolve, says Charles Spinelli. A business borrows what it needs, repays the loaned amount, and accesses the funds again when needed. This allows a company to address its needs quickly with very little impact on the bottom line.

Better financial relationships

Small businesses that manage a business line of credit responsibly show lenders that they are an acceptable credit risk, which can positively affect financial relationships. For example, as companies grow, they may need a credit limit increase. Having a stronger relationship with a lender makes future financing go smoothly.

images.pexels.com

Higher credit rating

Companies that manage their credit lines well and repay their credit lines on time can raise their credit ratings when lenders report to credit bureaus, adds Charles Spinelli. A higher credit rating can help companies negotiate better terms for their next loan.

Less interest

With a business line of credit, borrowers only have to pay interest on the portion of the credit line that they want to use. At the same time, term loans generally require businesses to pay interest on the entire loan, regardless of the amount used, explains Charles Spinelli. For instance, a business owner takes out a term loan for $25,000 and deposits the money into the company's bank account, but the company only uses $5,000. The monthly payments are based on the $25,000 loan amount, even though the business owner only used a small portion of it.

Charles Spinelli shares important information on workers' compensation insurance, business lines of credit, and other related topics in his blogs. Read them on this page.