In business, there’s good and bad debt. A debt is considered good when it helps increase your cash flow and ensures your business thrives by meeting its obligations. These include paying off loans, buying supplies or raw materials, or settling payroll. One of these good debts is called revolving line of credit.
What Is Revolving Line of Credit?
A revolving line of credit is a loan agreement between you and the lender, which is usually a bank. The loan involves a particular maximum amount or limit, which you can withdraw at once or gradually, depending on your need.
As an example, let’s say the bank approves $30,000 as your revolving credit. You can borrow the entire amount or get $5,000 immediately, $7,000 the next month, etc.
It also lets you pay your borrowing at different amounts. Using the example above, let’s pretend that instead of paying $5,000 at once, you may spend $500 a month.
In other words, it doesn’t matter how you use or pay the loan as long as you don’t go beyond the credit limit or do not go below the minimum amount.
How Does It Differ from a Credit Card?
A revolving line of credit is often compared with a credit card, perhaps because they do have some similarities, one of which is the credit limit. You also need to pay an interest.
But there are also major differences. You can use a revolving line of credit for many purposes, such as payroll, which doesn’t constitute a purchase. Moreover, you’ll find a revolving line of credit to be more flexible. Depending on the lender, this will also be more affordable. You usually pay a small fixed fee on the amount you borrowed, like a regular bank account. If the market is good, you can take advantage of a lower interest rate.
What Are the Benefits of a Revolving Line of Credit?
1. Easy application – A revolving line of credit is a friendly loan for small businesses, and as such, the requirements are usually few and are easy to obtain. It’s also more likely you will get an approval faster than a traditional loan.
2. Flexibility – You are more in control on how you want to use the funds, as well as your manner of payment and the amount you can pay.
3. Mode of withdrawal – With a revolving line of credit, you don’t have to bring a plastic. Instead, you can transfer the funds directly into your bank account. You can then withdraw it anytime and anywhere.
4. Increase – At a certain point, the lender may allow you to apply for an increase of your limit, especially if you have a good credit standing (e.g., pay your dues promptly).
5. Credit History – If you’re a small business trying to build a credit history to apply for a bigger loan, you can use your revolving line of credit to achieve that.
Increase your cash flow and gain more flexibility on how to manage business funds. Apply for a revolving line of credit today.
Are you consider getting a revolving line of credit? Know the basics how it works at Revolvinglineof.credit. Find out more and click here.