Everything You Need to Know About Business Lines of Credit for Startups
Finding the right financing for a startup can be a challenge, especially if you only know about traditional business loans when you start. Those loans are designed for established companies, usually those with a substantial business history. If you’re looking for funding that’s not tied to purchases and doesn’t revolve around a new asset purchase, you need to look at alternatives like lines of credit. It’s not just that they don’t require the two-year history most loans do, these products are designed to provide working capital, which is mostly what startups looking for funding need.
Credit lines are not only versatile, they’re also reusable, which means once you pay back the initial advance, you can draw on any available balance any time you want. You manage how much credit debt you carry, up to your limit, so you can pay it off and then count on it as a resource for the next time you need a little extra working capital to keep your cash flow on track. If your credit score gets high enough, you can even access enough credit to use it in lieu of a traditional loan when you’re buying less pricey pieces of equipment or supplies. You’ll still want secured financing for very large purchases, but you can take care of the smaller pieces with a credit line.
Lines of credit aren’t the only short-term financing opportunity, but they are one of the most powerful, and they are usually accessible to companies with healthy finances regardless of how long they’ve been in operation, so they can help you build your initial credit score if you’ve never had business debt before. That makes it a good idea to set up a credit line before you worry about accessing those other forms of short-term financing, so when you do need them, you’ll have already established credit for your business.
There’s no way to overemphasize how important flexible working capital is for startups, and there’s no debt product better designed to provide working capital without question and as needed. Whether you’re looking for financing for some extra labor or stocking up on supplies, renovating to better position your sales force seasonally or doing needed updates and repairs to your facilities, the same financing product can flex to meet all those needs. For new businesses that don’t usually have a wide range of options when it comes to financing, it can function for practically any purpose, giving you the room you need to build the financial base that will serve you well as your business expands into new markets.
