Charles Spinelli Offers an Insight into How Opting For a Line of Credit Benefits Businesses

Studies reveal that nearly 58% of small and medium enterprises including startups experience cash flow challenges and lack of working capital due to delayed payment of parties, increased overhead, reluctance of banks to provide financial support, and other issues. Deficient working capital ends up companies searching for financing options like loans or cash. However, since private lenders and most public banks demand very high-interest rates due to their low or no credit score, most MSMEs strive to find other sources. Charles Spinelli considers that as a flexible loan, the option of a business line of credit has emerged as a windfall for startups and MSMEs. Sounds interesting! Explore more about the credit option.

What is a Line of Credit?

A business line of credit is a flexible funding option offered by many banks and financial institutions. The essence of a line of credit is that, unlike traditional business loans, as a revolving form of loan, it allows small businesspersons to borrow funds as per need with a pre-decided limit. It also facilitates the borrowers to pay only the interest charged on the borrowed amount. Once the borrowed funds are repaid, it allows businesses to draw that much funds once again. Following are the key benefits of a line of credit.

1. Flexible Funding

A noteworthy benefit of the funding option lies in its flexibility. As stated, businesses can borrow funds as per their requirement, repay them, and redraw the funds again. Thus, its on-demand easy access benefits MSMEs to carry out their businesses more productively and profitability which translates it as a versatile tool for their sustainability and consistent growth.

2. Interest Rates

Compared to credit cards, most lines of credit offer lower rate interest thereby making it an affordable funding option. So businesses are obligated to pay merely the interest on the borrowed part, not on the entire credit limit.

3. Multipurpose loan

As per the viewpoint of Charles Spinelli what makes the line of credit unique is that the funding option allows businesses to use the fund for different business purposes from buying raw materials, paying staff salaries, buying machinery, or anything else. Thus, there is no rigid term like a traditional loan that the loan needs to be used for a particular purpose. For instance only for buying business machines.

4. Build Credit Score

Using a line of credit responsibly, paying interest as per schedule, and repaying the borrowed money on time helps businesses build a steady credit score gradually. Increased credit score boosts the creditworthiness of the business and paves the way to future borrowing on easy terms thus promoting the financial health of the establishment.

5. Emergency Shield

Another major benefit of opting for the funding option, it that – working as a safety net, the funding option helps get flexible credit in the event of unforeseen events or emergencies such as a breakdown of equipment or to execute a huge order, etc.

According to the viewpoint of Charles Spinelli, while credit lines arrive with so many advantages, businesses should use and manage the funds responsibly and grow good payoff habits. Make sure to follow the best practices while opting for the on-demand fund.

Proper planning: businesses should determine their specific need for funds with a proper plan to avoid borrowing excess funding, and taking an extra burden on the business. This will make them responsible borrowers.

Repayments on time: to boost a positive credit score and sound credit history never forget to stick to repayment schedule on time.

Review and adjust: Adjust borrowing as well as repaying strategies as needed with regular reviewing of the credit line to maximize benefits and minimize risks.

Following the best practices can help optimize the use of a line of credit and thereby help maintain a healthy financial standing for business growth and sustainability.