When businesses obtain unsecured lines of credit, they do not need to put up an asset as collateral. To obtain one, your business will likely need a strong application. This article takes a look at the uses of unsecured lines of credit.
Solving Cash Flow Issues
According to the Small Business Administration, a popular use for a line of credit is to solve short-term cash flow issues. For instances, for businesses that need to purchase supplies to fill an order, unsecured lines of credit may be an option. A line of credit can also be used to help with payroll costs and inventory, and they are particularly useful for seasonal businesses that make most of their money during certain spurts of the year. (Note that it is probably not advisable to rely on a line of credit to cover everyday costs long term.)
If an emergency arises for your business–for example, a flood that disables your office–a line of credit can help you cover expenses until your business is back up and running.
Separating Personal and Business Finances
An issue that is particularly prevalent with small businesses is that it can be difficult for the owner to keep their business and personal finances separate. Unsecured lines of credit allow business owners to maintain a separate account for business expenses.
Building Your Business’s Credit
If your business obtains an unsecured line of credit, it can be used to help boost your business’s credit score over the long term. A history of on-time payments and responsible use of the credit line will reflect well on your business. Just be sure to stay on top of your business’s payments, and don’t use more of the credit line than you can pay back quickly.
For information on other topics regarding business financing, check out GrowthCC’s other blog posts.