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5 Ways a New Business Credit Line Can Benefit Your Business

5 Ways a New Business Credit Line Can Benefit Your Business

By Marco Carbajo, Guest Blogger
Published: April 21, 2016 Updated: May 16, 2016

Having access to cash is an essential part of success in business whether your company is just getting started or has been in operation for quite some time.  Rather than dip into personal savings, credit cards, look for investors, or borrow from friends and family; why not consider opening a new business credit line?

A business credit line can provide the most flexible source of capital a business owner can use to manage their company.  You get the ability to draw on your business credit line to meet different financial needs such as purchasing equipment, buying inventory, paying off other debts, or almost any other necessity. The National Federation of Independent Businesses says, “Think of it as an insurance policy that never needs to be paid until you need it.”

It works similar to a personal credit card because you have a specific amount of credit available, it’s revolving, and you don’t make payments or incur any interest until you start using the credit line. For example, if you are issued a $50,000 line of credit and you use $15,000 to purchase equipment, you will still have access to the remaining $35,000 if needed. If you paid the $15,000 to a $0 balance, you will then have access to the entire $50,000 without having to reapply for credit again.

Here are five ways a business credit line can benefit your company:

1) Helps Track Expenses – Using a business credit line can help track your company’s purchases and separate your business and personal expenses. Each monthly billing statement will provide a detailed transaction history, which can make it much easier during tax season and save you time and money.

2) Build the Company’s Credit Identity – Acquiring credit for the business is an important step in creating a business identity (creditworthiness) that is separate from that of the business owner. As the company builds its own credit history and ratings then banks will want to compete for its business since. This positions the business to gain better access to borrowing power with favorable rates and terms.

3) Protect Your Assets – With an unsecured business credit line there is no collateral to supply, which means none of your personal and business assets are pledged as security for repayment of the credit line. Keep in mind that in the event of default while your assets will not be at risk, your personal credit and future ability to borrow would be affected.

4) You Keep Control of the Business – Compared to other sources of raising funds; a business credit line enables a business owner to retain complete ownership of the business.  This is a much more favorable approach than searching for outside investors who want an equity stake in the business.

5) Fast Access to Cash – Business credit lines enables a company to get cash whenever it needs to bridge the gap between payables and receivables. Business owners get fast, easy access to cash for all types of needs, including operating expenses, product expansion or taking advantage of opportunities for growth.

Cash flow is the lifeblood of a small business and at one point in time every small business could face a cash shortage. When you’re facing a shortage of cash, you don’t have time to apply for a traditional loan. That’s why it is essential to have access to a business credit line so you can have access to cash for short or long-term needs.

About the Author:

Marco Carbajo
Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the Community, and All His articles and blog; Business Credit, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.