Line Of Credit And Its Utility For Small Businesses

1. Blog: Abnicholas.com Line Of Credit And Its Utility For Small Businesses Line of credit is an arrangement in which a financial institution agrees to lend money to a borrower up to a specified limit. A line of credit in business provides accessibility to funds as needed, up to a predetermined limit. Versatility is the major benefit of a line of credit. It is most suitable for emergencies as the interest is not required to be paid until the line is drawn on, and funds are always available when you require them. This type of loan is very useful for financing small businesses like franchise financing This format of financing works just like credit cards.. When you are granted a credit line then you can draw down on the balance as you need. If you have problem in maintaining a positive cash flow all the time even if your business is profitable, then this type of financing is the right solution for your problem. A line of credit is provided against an asset which can be your personal assets or your business assets. However you can seek a number of different alternatives if you do not qualify for a traditional line of credit based on your personal or business assets. One such popular way of obtaining this finance is security based line of credit where client’s stocks, bonds, mutual funds or other securities are used as collateral. To conclude I would say a line of credit can truly assist your business if you have complex and ongoing financing needs. If you are able to obtain this financing through the Small Business Administration then you can expect highly competitive interest rates as well as flexible repayment terms.