Money for Small Business

Secured Business Credit

One of the first things you need to think about when starting a business is how you are going to handle your cash management. This is something that sinks a lot of new businesses right out of the gate because they do not plan for unforeseen expenses. One of the best tools you can use for this is secured business credit. Any business line of credit can be good to have; however, a secured line offers a few advantages over an unsecured line.

There are many reasons for having a business line of credit. Having a line of credit offers the business owner a chance to operate the business on a much steadier course, and it is imperative if the business is seasonal. This way there is no scrambling around month to month to make loan payments or meet payroll. It also allows the business owner to manage any emergencies that may arise. Also, business credit lines allow the borrower to continue borrowing while paying back the principle. This is great because you do not have the headache of having to continually apply for loans. Lastly, it is wise to have access to quick cash in the event that a great opportunity comes along. Perhaps you own work van that is beginning to show its age. You know you can get another year out of the old one, but you spot a really nice van at an incredibly low price. This is where a line of credit can come in handy. You can make a call and set up the payment immediately and not have to worry about losing the van to another buyer while waiting for a bank to make a decision on a loan.

There are several reasons to choose secured business credit over unsecured credit. Typically, secured lines offer much lower interest rates since there is collateral involved that the lending institution could seize in the event of a default. Also, secured lines of credit often offer much higher credit limits. Especially in today’s economic climate, banks do not like to offer extremely high lines of credit if there is not a strong piece of collateral backing the line whether its accounts receivables or inventory.

When applying for secured business credit, remember to not limit yourself to your current bank. You should shop around to different banks and credit unions to find the best deals. With technology today you do not have to keep your search local either. Internet only banks can offer significantly lower rates and fees because of lower overhead. Make sure you get all fees and rates in writing to compare before making any decisions. If you are applying for a large line of credit it may pay to have your accountant run the numbers to see which deal is better.

You should be able to get a great deal on a line of credit in today’s economy. Just remember to shop around and compare all offers. Secured lines of credit can be a life saver for many businesses if used properly.

Popularity: 44% [?]

Filed Under Lines of Credit | Comments Off

« go back — keep looking »