Running a business can get costly. From having large costs that you need to cover monthly or even weekly adds up, but the most important ones are the day-to-day costs that your business needs to take care of. Therefore, having a steady cash flow to run smoothly is important and critical for businesses. Cash flow challenges are unavoidable, having ups and downs is part of every business journey. Yet, there could be times where your sales can be booming but after all the costs of payroll, equipment and such you as a business owner could be short to access cash. So what can you do?
Access To Easy Cash
When your business is in need of capital, but most importantly access to capital in the moment some can’t find a solution. Most business owners tend to go straight to the bank and ask for a credit card. Having high interest rates, collateral to support your credit can be scary. And hope you have good credit is a big factor to banks. That is why when a business is in need of short-term funding, the solution we tell everyone is having a line of credit.
The difference between line of credit and revolving credit
A line of credit and a revolving credit have a few similarities but differences as well. They both are financing arrangements that is available to businesses. Both of them provide the borrower with purchase flexibility and payment flexibility. And there are a few differences between a revolving credit and a line of credit.
When a lender provides a revolving credit account, they assign the borrower a specific credit limit. This limit is abased on the clients credit score, income, and credit history. Once the account is open, the borrower is able to use and reuse the account at their discretion. So, the account remains open until either the lender or the borrower decides to close it.
A non revolving lines of credit have the same features as revolving credit. There is a credit limit that is established, funds can be used for a variety of purposes, interest is charged at a fixed rate, and payments may be made at any time. The one difference between the two, is that the pool of available credit does not replenish after payments are made. So once you begin using the line of credit and pay it off in full, the account closes and it can no longer used.
What to know about applying for a revolving line of credit
Not every line of credit works the same way. There are different types of revolving lines of credit, including short-term and long-term lines of credit to business credit cards.
Banks would have been one of your only options for applying for a revolving line of credit. Fortunately to the internet, there are alternatives to lending. There are different sources available for business owners of all different credit backgrounds, and at different stages in the business cycle. If you have poor credit history, and little business history, it’s harder to secure a business loan with low-interest and long-term loans. The same rule applies to a revolving line of credit. Business owners who do not meet the revenue, credit score, or business history requirements of long-term business loans are likely to only be approved with a revolving line of credit with lower funds available and higher interest rates and APR.
Ideal Uses of Revolving lines of credit
Revolving lines of credit are ideal for seasonal businesses or companies that experience sales fluctuations. If your business has a high and low sales seasons or has a gap between completed work and payment, you may find that revolving line credit is beneficial to create a bridge. An example is if your business receives a large order and you need to buy inventory in order to complete it, a revolving line of create can be an ideal way to purchase that inventory.