A line of credit has several advantages for a small business. It can help with your cash supply during slow periods, help pay for unexpected expenses, and more. This article looks at some ways to make the most of this financing method.
Frequently Update Your Account
Even if you make relatively infrequent use of your line of credit, it is important to keep your information up to date with your lender. If you do not use your credit line for a long period of time, the lender may ask you to update your information. That is because they want to see if your financial status has changed for better or worse.
Additionally, while you should not withdraw funds if you do not need to, periodically using your credit line and paying it back down shows responsible use of it. This can make it easier to get a larger line of credit in the future.
Be Wary of Liens
Lenders place liens on the property or business of borrowers as a security measure. They provide a way for the lender to force the borrower to pay the money back or recoup value if they do not. A lien on your business may damage your ability to obtain a larger line of credit in the future, among other complications. Before borrowing, check in with your lender to understand at what point they might place a lien on your business. Additionally, when ending a relationship with a lender, ensure that any liens end as well.
Keep Your Bank Account Healthy
Lenders will want to see that you are good at managing money before extending you credit. That means it is important to avoid negative bank events—that is, overdrafting your account or running into non-sufficient funds. To avoid these, spend wisely and monitor your bank account carefully.
IRC Commercial Lending offers a full line of business-financing options. To learn more, check out our other articles or get in touch today.