A small business line of credit is one of the most versatile tools for this because it can give you peace of mind when you have to manage unexpected expenses. Whether you need a financial cushion for emergencies or a flexible solution for making multiple purchases over time, a line of credit puts you in the driver’s seat, minimizing the impact of surprises on your operations.
The Meaning of a Small Business Line of Credit
A small business line of credit is a single source of funds you can borrow on demand, up to a defined borrowing limit. It works pretty much like a credit card, with one key difference: while a credit card can be used to cover personal expenses, a line of credit is reserved for business-related purchases.
That difference aside, the comparison between a line of credit and a credit card holds true, and the main benefit is the same in both cases. Because you only have to pay interest on the balance of the line of credit that you borrowed, you’re free to put the borrowed funds to work without worrying about coming up with a lot of money to repay it in a lump sum.
The Power of Flexibility
There are a number of ways to get a small business line of credit, but some of the most common methods involve banks, credit unions, and other similar financial institutions. In most cases, businesses with low credit scores, little to no revenue information, or no history of successfully managing other types of credit are not likely to qualify.
However you obtain your small business line of credit, it’s the revolving nature of the credit that makes it one of the most attractive financing options available. While traditional loans may be used with multiple draw options, the total loan amount still comes due on the maturity date.
A line of credit, by contrast, provides the borrower multiple draw options up to an authorized limit, and there is no predefined maturity date when the entire loan amount becomes due. Instead, the borrower is free to access the line of credit for purchases on an as-needed basis. You can see that a line of credit gives a business more control over how much of the money is borrowed on any occasion.
Why a Small Business Line of Credit Is Essential
If you are a small business owner, having quick access to the right type of credit at the right time can be a make-or-break decision for your continued success. A small business line of credit allows you to have liquid funds for whatever you need, whether it’s a vehicle repair or an unexpected opportunity to expand into a new market.
You have the flexibility to address any surprise funding needs that arise without going into panic mode. As a business owner, it’s hard to predict when your equipment might break or when you might have an opportunity to make an investment to grow your company. After you pay it back, you can borrow from it again. This cycle can help you manage the natural ups and downs of a business.
Using It Responsibly
You can generally use the funds for any business impact as long as you use it responsibly. While there typically aren’t restrictions on what you can use your line of credit for, that doesn’t give you license to use it any way you like. That means you should only use it when you need it. You should only have a small business line of credit when you need it to manage short-term needs.
The best way to use it is when you can invest in something that will generate returns. Aim to pay off your balance as fast as possible. As with any lending product, this isn’t free money. So, pay down your balance as fast as possible because it’s only a temporary and short-term solution.
How Bluevine Can Help
To pursue a small business line of credit, look for options from reputable providers with clear and flexible terms, as well as competitive pricing on your line of credit. With the Bluevine business line of credit, eligible businesses can qualify in as fast as a few minutes and receive funding in as fast as a couple of hours.
This is much faster than a traditional business line of credit simply because the process is much easier. They’ll generally fund up to $250,000 in capital when you need it. The best part is you don’t have to pay for what you’re not using. They settle you at the end of every month, and the rates are incredibly transparent and low-cost.
Stay Prepared for Anything
Having a small business line of credit means you’re always ready for the unexpected. Whether you need to manage a cash flow issue, a new opportunity comes, or are planning for upcoming seasonal swings, a line of credit offers a reliable and flexible solution.
If used the right way, this tool can help keep your business in healthy order and take your business to the next level when traditional funding might not be an option. By partnering with a reputable provider like Bluevine, you can feel confident with this line of credit tool in your toolbox, helping you keep your growth going for the long haul.
