A business line of credit is a way to ensure a company has the consistent cash flow needed to meet responsibilities. While many lines of credit are secured, which requires collateral, others do not require to use a personal or business asset as collateral. Unlike loans, lines of credit are only used as needed, and repaid only when used. There are a number of benefits to business lines of credit for your company.

Greater Control of Capital

A traditional loan gives a lump sum of cash with specific repayment terms. However, a business line of credit provides capital as needed rather than all at once like a traditional loan. In addition, you only pay interest on what is used. That gives you better control over the money to be used when needed. In addition, there are no restrictions about what kinds of purchases can be made, as can be with some types of loans.

Improved Credit

A business line of credit is a line of credit that gets reported on your business credit history. If you cannot qualify for financing because of your business credit score, a business line of credit can help. Using the credit wisely and repaying promptly will help contribute to your credit history. That way, if you need a different type of financing later, you will have a better credit history for your application.

Low Interest Rates

When considering the overall cost of a loan or line of credit, the interest payments must be taken into consideration. Fortunately, business lines of credit have lower interest rates compared to other types of financing, which can make them easier to manage when planning your budget.

If your business needs capital from time to time, such as to make purchases during a slow sales period, a business line of credit may be a good option for you. Taking these benefits into consideration can help you determine whether you want a business line of credit or another type of financing.