Charles Spinelli’s Insights on Business Lines of CreditIf you’re a business owner, Charles Spinelli says that chances are you’ll need access to working capital. This funding will help your company grow. From time to time, even successful small businesses will experience unplanned and urgent expenses. They may also encounter late invoice payments as well as other short-term situations. In these circumstances, cash flow will be less than certain. Here, extra funding can mean the difference between closing the shop or surviving the tough times.
Learn more about business credit lines with these nuggets of information from Charles Spinelli.
The uses of business lines of credit
If you have a seasonal business, Charles Spinelli mentions that a line of credit can help cover overheads. It can also cover payroll in the off-season. If you’re still waiting for clients to pay you, a line of credit can cover costs in the meantime. You may also use it to take advantage of a bulk purchase price on your inventory.
As mentioned earlier, repayments are more flexible than with a term loan, and you can generally pay lump sums with zero penalties.
Reminders for getting a business line of credit
The time to get a business credit line is before you need it.
According to Charles Spinelli, apply for a credit line when business is good, and your cash flow is on the rise. You’re more likely to get approved. You’re also more likely to get better terms.
When you apply for a business line of credit, Charles Spinelli says you’ll need a few things. It would be best if you had your bank statements, balance sheet, income statements, business credit history, and maybe even your personal credit history.
Also, note that some lenders won’t give you a credit line unless your business has been earning money for a few years, adds Charles Spinelli.
Business credit lines versus term loans and credit cards
A term loan is the main alternative to a business line of credit. With term loans, you borrow a lump sum, after which you make regular, fixed repayments. It can be done over a set amount of time.
You can get a larger amount with a term loan than a line of credit. Because of this, term loans are more suited to major, high-cost purchases. An example of which are buildings.
A line of credit, on the other hand, is ideal for short-term things. Examples of this are purchasing inventory, repairing equipment, and day-to-day expenses when cash flow is tight.
It’s always good to have a credit line. It will help you when your borrowing needs are hard to predict, notes Charles Spinelli. It’s a financial cushion.
That said, beware of the interest rate. It can be higher than a term loan.
When compared to credit cards, business credit cards are unsecured most of the time. It means you don’t put up collateral to offset the risk of the lender. As a result, the lender will charge you higher interest rates and fees.
Business lines of credit are different from credit cards. They can be secured. Once you offer collateral, the interest rate will most likely be lower. You’re also more likely to be able to withdraw more.
Charles Spinelli writes about different topics on business. Read his blogs by clicking on this link.