Business Line of Credit Options for Small Businesses
Your credit score is one of the most important tools you can develop if you’re managing a business. It not only determines whether you will be able to qualify for loans when you want to invest in new assets, it can also affect your costs for products like insurance. One of the best ways to build and maintain a credit score is through business credit lines. There are a variety of different kinds of credit for businesses, ranging from unsecured lines of credit that allow you to make cash draws to business credit cards and cash advances against your company’s assets.
If you’re trying to decide which option is best for your company, the key is to remember there is no one best choice. Each credit option is designed for a slightly different purpose, so your selection needs to be made based on the best choice right now, and you need to be open to the idea that you might want to add another credit source in the future. That kind of versatility in planning will help you know when your company is ready to increase its financial toolkit, and it will also give you a solid plan for the occasion.
Business credit cards are often the very first kind of credit a company acquires, because they are widely available, often from the same institutions you open your business checking account with. They tend to have smaller spending limits than most other credit types, though. Sometimes, they also have higher interest rates. These credit cards are great for streamlining your expense accounting and extending your cash flow, but unsecured lines of credit are often attainable by the same companies, and they are usually a better option.
Unsecured credit lines are reusable like the balance on a credit card, but they work as a cash draw account, so you can transfer money to one of your business bank accounts as you need it. They’re often granted with larger spending limits than cards, and they can serve as a bridge to more traditional business loans because of this. On top of that, credit lines tend to have interest rates somewhat below credit cards.
If you aren’t looking for asset financing and you don’t have an unsecured credit line yet, you should really consider this option for your company. Unsecured lines of credit are versatile, they’re often available to small companies that don’t have a long credit history, and they allow you to start building your company’s credit score.