In fact, a study by U.S. Bank revealed that 82 percent of small businesses fail because of poor cash flow management. To smooth uneven cash flows, many business owners turn to short-term credit as a flexible solution. In addition, it can be more cost-effective and convenient than a credit card or bank loan. In this blog post, we’ll explain what a short-term line of credit is, how you can qualify, and how to determine if it’s the best funding option for your business.
What is a Short-Term Line of Credit?A line of credit is a popular type of business funding that can be used for both routine and unexpected expenditures. Unlike a traditional bank loan, you don’t need to specify how you’ll use the line of credit in order to be approved. Instead, a business line of credit operates more like a credit card. With a credit line, you’ll receive a fixed amount of credit that’s available when you need it. In order to pay off your balance, you can repay borrowed funds all at once or in periodic installments. Although short-term credit lines have many advantages, they’re not right for everyone. Before selecting the best short-term financing solution for your business, ask yourself a few key questions.
Is Short-Term Credit Right for Your Business?
1. How Do You Plan to Use the Loan Funds?Business lines of credit are designed to help you meet your short-term working capital needs, which can include:
- Inventory purchases
- Equipment repairs
- Emergency Expenses