Revolving Lines of Credit vs. Business Lines of Credit
Depending on your specific business needs, you may be wondering how best to finance your upcoming expenditures. There can be many different financing options out there and it might be confusing as to which option is best for you. With all of the options available, it’s important to have a working understanding of some of the more common options so that you can understand their respective benefits and shortcomings. Business lines of credit and revolving lines of credit are two of the most common options available. Each one has advantages and disadvantages and one or both of these options can be used by your business to fund your next investment or expense.
Revolving lines of credit
Revolving lines of credit are unsecured credit lines, similar to a credit card. There is a credit limit on the amount you can use at one time, and the borrowing term is generally indefinite. This type of credit is great for smaller, routine purchases like office supplies, furniture, or maintenance. You may keep this line of credit open for as long as you’d like, which affords you the flexibility of always being able to have cash available when you need it. This is different than a conventional loan with a fixed payoff date. While it may be tempting to borrow money and always have some in your account, you will need to be mindful of not overextending yourself. Repayment is often flexible with revolving lines of credit, but it could be a financial strain if you don’t manage your funds appropriately. If you’re interested in opening a revolving line of credit, you can ask your local bank or credit union about what options they have available.
Business Lines Of Credit
Business lines of credit, on the other hand, are specifically suited for larger purchases. These can range from startup expenses to the purchase of a new building. If you’re a larger and more established business, a business line of credit might be a good option for you. Business lines of credit are a convenient way to gain access to large amounts of cash fast for unexpected business opportunities. While revolving lines of credit are hampered by credit limits, they are not particularly suited for the larger investments that can be met with business lines of credit.
Fluctuating cash flow can lead to unpredictability and hesitation when it comes to new business opportunities. Funding is important for decisions of this type which it’s important to decide which financing option is best for you.