So you’ve been in business for a few years and you want to keep the face of your company looking fresh. And that means updating. According to AllBusiness.com, a line of credit is one of the most common tools used by small businesses in need of an update. But is using one right for you?
These facts can help you decide:
- What is a small business line of credit? A line of credit is a revolving credit account on which you pay interest—typically every 30 days. Because you don’t use the entire line of credit at once, you only make payments on the portion used, and the amounts of the payments vary. Typically, you draw on the line of credit by using checks.
- Lines of credit can be both secured and unsecured. With a secured loan, you’ll need to use something as collateral, and inventory can sometimes be used. According to the U.S. Small Business Administration, an unsecured line of credit is your best option for having ready cash available. But is it your best option for an upgrade?
- When should I use a line of credit? While a line of credit can be used for any business-related expense, if you want to update the look of your business, a loan might be a better option because you’ll have a fixed rate and payment, and you will be better able to figure the cost into your business expenses. Lines of credit are generally used for short-term business needs, functioning as cash to cover gaps in expenses or to purchase inventory.