When it comes to financing small businesses, many owners are not aware of the availability of business lines of credit. The Small Business Association offers information on how to obtain a small business line of credit from banks and other lending institutions, as well as suggestions for making the most of the new credit option. Here is some advice on what you should expect when drawing out a business credit card from your bank or lender.
Like any other type of loan, financing small business lines of credit comes with various terms and interest rates associated with the agreement. Interest rates will be higher than they would be for a mortgage or personal loan. In addition, credit cards carry higher fees that must be paid off before the interest rates can be reduced. The key to getting the best financing is comparing the different offers by different banks and lenders. Know what kind of fees and rates you will have to pay before you draw out a small business credit card.
To find the lowest interest rates, you will need to research to find out which lenders are offering the lowest financing charges. Many banks will offer small business lines of credit at a low introductory rate for some time after which the interest rate will increase significantly.
If you have good credit, you may still be able to get a low-interest rate for your first year of financing. For those who have less than perfect credit, however, they may have to pay back a considerable amount of capital to repay the loan. There are also finance programs available through some credit unions that charge extremely low-interest rates if you are a member.
Some small business lines of credit come with the option of a fund source unsecured small business line of credit. This is a unique option because it does not require the borrower to provide collateral, such as property or personal assets. Instead, the bank will issue this type of credit only if the company has the funds available to pay back the credit if it is repaid. If the company does not have enough cash on hand to repay the loan, then it will not be issued with a working capital asset as security for the small business revolving lines of credit.
Small business lines of credit that have a fund box feature are offered at different interest rates. Your company can choose to close the fund box if it does not meet the minimum balance requirement. You can also choose to make weekly payments directly into the account every week. In most cases, the interest rate will be very high during the first six months of the agreement. Six months later, it will be substantially lower.
As you can see, there are many different options available when it comes to working capital management. If you own one or more businesses, you should consider all of the options. Whether you use a business line of credit or a personal credit card, you can benefit from establishing an effective funding mechanism that gives your small businesses the extra funds they need to stay open. However, be sure to choose the option that is right for your particular company.
