Business Credit Lines for Small Time Businesses

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( — February 23, 2018) —  Small businesses are the underdogs. Even with the intention and desire to grow and be more competitive, there is little they can do with no working capital. It is difficult to secure bank loans because how can you show you are good for it when you are staking everything on one business venture? With no reliable history and minimal capital on your part, it doesn’t paint the most convincing picture.

Business credit lines change that. It is similar to having a credit card, but instead of personal finances, these are designed for growing businesses. A major problem for a new and upcoming business is to have a large amount of cash available at one time. You know you are good for it, but the expenses pile up too quickly for you to properly save up for your plans. Be it for hiring more employees, adding new stock, or renovations—these are all things that have to be done but with a slowly growing capital to make it happen. You have three options: wait it out, go big, or find alternative means such as getting a line of credit with Fundbox.

Credit cards are a blessing and a curse in an average person’s life. With Rebecca Bloomwood in Confessions of a Shopaholic, we can see the mess that comes when you spend above your means. Committing to any kind of credit requires a plan and motivation to properly meet deadlines. No one can deny the benefit of having credit, but at the same time, the security it provides might be too tempting to some. When it comes to your business, a lot more is at stake especially if you have partners. One bad investment along with debt and interest does not only compromise your income but your personal relationships as well. This is probably why people opt to take it slow.

The first option is to take the long route.

With a solid budget plan, you can set aside profit to make your desired changes. Each project has to be carefully planned out and they cannot happen at the same time. If you opt to hire more people, installing shelves will have to wait for awhile. If there is no working capital, then any changes have to come from somewhere else, be it your own pocket, sponsorships, or inviting investors.

If you are alone and this is your only source of income, as the owner, you are more likely to make sacrifices for this to work. While you rack up debt, you are left in a very vulnerable state. One bad employee, a bad order, or an unexpected storm may set you back months at a time. With outside help, you cannot make the same independent decisions, and the changes might not even go according to plan. Creative and conceptual difference stand as another obstacle if you do manage to receive funding. There are no safety nets, and growth will always take a back seat. This requires a lot of patience and endurance if you are going to keep up with the other businesses.

The second option is to go big.

You may opt to have an unsecured business credit line. The perks of an unsecured business credit line are that there is no need for collateral, you don’t have to risk anything to be able to borrow. This type can be found in banks. The only problem is that since there is a higher risk with no collateral, the process takes very long if you do not meet the requirements. The bar is raised high and you, as a business owner, need to have good personal credit. This is hard to establish if you are alone and just starting out.

Another problem with going big is that you cannot receive a large amount and the interest rates are high. If you play it smart this won’t be a problem. However, if your working capital does not generate the profit you need to properly move forward those high interest rates pile up to your already growing list of expenses. It almost stands in as a loan.

The third option is to take an alternate route.

Business credit lines are essentially credit cards for businesses, so why does the owner have to be the one who is assessed? Platforms like assess the businesses themselves as a basis for establishing credit. The transaction fees of these platforms are per week, the earlier you can pay back the less the fee. They also lend up to $100,000 at a time.

This promotes a more competitive approach for borrowers. With an incentive for waived fees for early to on-time payments, it pushes businesses to be innovative and to stretch the money as best they can. There is also no limitation on how many times you can borrow. The first few years of a business are the most trying because the business is new. They have yet to properly integrate themselves into the market and have not properly tapped into their demographic. It is important to keep the interest alive until stable.

This stands as a good solution to those who plan on expanding as well as those who hit a rough patch and are looking for a way to reinvent their approach. But in the same way as credit cards for regular people, you have to be sure that you are capable of making the payments. With business credit lines there are so many ways for your small business to grow. You can be juggling multiple projects at the same time if needed. The toilet doesn’t have to wait if you want to install decent internet. You can hire people on full-time and not have to consistently train people for part-time jobs. Overall the new expansion helps establish an efficient way of running things. With a full-time staff and a properly set up space, you can look into another business venture instead of worrying about the everyday technicalities. When done right, your business won’t be so small for long.