Obtaining an unsecured business line of credit to fund your business, before you need it, is a very wise decision. As a small business financing expert, I have come across numerous small business owners who wait until they are in a bind to apply for financing. This includes waiting until the last minute to apply for unsecured business lines of credit. It’s important to have the capital you need to operate your business on hand, all of the time. You can only do that by planning ahead. Here are three reasons why you should get an unsecured business line of credit before you need it–
- Slow Sales – All small businesses go through periods of slow sales. If you’ve been monitoring your business activity closely, you’ll be able to measure the time of year when sales slow down the most. If you know this, you can plan ahead to combat any cash flow issues. Having an unsecured business line of credit on hand will enable you to cover the cost of your expenses when sales are slow.
- Continuous Access to Capital – Unsecured business lines of credit are revolving, therefore you can have access to them for the life of your business as long as you manage them well (and the lender wants to continue their relationship with you). This includes making timely (monthly) payments and paying off the total balance in a timely manner. You are going to need continuous access to working capital, and you’ll have that with unsecured business lines of credit as long as you manage them properly.
- Build Your Business Credit – Building your business credit history will enable you to separate business debt from your personal credit history. Depending on the lender, they may report your unsecured business line of credit usage to the business credit bureaus (i.e. Experian Business or Equifax Commercial). If you are managing your unsecured business lines of credit well, they may help you build your business credit score. Building a business credit score will enable you to qualify for other types of financing (using your business credit history) in the future.