Formula For the Best Rates On Your Line of Credit

Entrepreneurs know that the best use of credit is to make money by using other people’s money at as low an interest rate as possible. When times are good and you do not need a line of credit, that is the best time to arrange for one. The timing and the steps to prepare for a line of credit are important to getting you the best interest rate and amount that can be used for working capital.

Even though businesses’ working capital needs are there from the start, in order to have a solid track record, business owners should hold off applying for a line of credit. What is important in the beginning months is to establish a credit history of paying bills on time. Any sign of struggling to make payments, such as a history of late payments, can be grounds for a denial of your application.

Many small businesses, such as restaurants and entertainment businesses, have a cyclical nature to their traffic flow and hence to their cash flow. In order to keep their payments on time, invest in needed inventory or a new piece of equipment, owners utilize their Visa and MasterCard future sales as a pledge to obtain a business cash advance. US Business Finance Corp’s cash advance program helps businesses get cash quickly when owners need to get their bills paid on time or expand their businesses. The cash advance can be utilized to build your on time bill payment track record so your credit history is ready for a line of credit application.

The benefit of a line of credit over a traditional loan is that you only pay interest on the amount you borrow. If a business gets a $75,000 line of credit, but only draws $15,000 of that, then the interest payment is only on the $15,000. Yet the company has the security of knowing it has $75,000 it can use as operating capital to meet any challenges or opportunities.

Another benefit of using a business line of credit versus a personal one is that the commercial interest rate for your business is most likely less than you could get personally. Keep in mind that, for small businesses, the owner usually gives their personal guarantee on the line of credit, so getting a business line of credit saves interest, but does not decrease owner liability.

The formula for getting your best rate is to apply for a business line of credit once your commercial enterprise has built up a solid credit history and at a period when sales are good. Having your credit line in place before you have a cash emergency arise is the best policy.

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Filed under: Business Cash Advance, Business Cash Flow, Business Solutions