In yesterdays article I talked about why leasing vehicles for my company and in today’s article I wanted to talk about another thing I feel all small business owners should do, have a line of credit.
For as long as I’ve owned my offline business I’ve never had to take a loan out on anything which has been a big help for getting off the ground however in early 2013 things got slow for a few months which wasn’t a big deal until all the work started to roll back in again.
Once jobs started rollback in I had to hire more employees, and buy more steel. In short time we realized things were going to get tight for a while. The reason for this was that once a job was finished and billed out it typically takes anywhere from two to four weeks to get a check.
In order to cover the gap in the mean time we turned to our local bank for a line of credit. A line of credit is a loan backed by the assets and income of the business but when it comes down to it a line of credit can be a very handy tool to have.
Why Get A Line Of Credit
A line of credit does not work like a typically loan. In most cases they may be required to be paid off within a year and in most cases you will only have to pay interest on the loan till the balance is due.
On top of that a line of credit works very similar to a credit card in that once it’s paid off you can keep it open and use it as you need it. The only difference is a line of credit is a secured loan where a credit card is not.
However what’s really nice about having a line of credit is that it allows you to get through the slow times in your business so you can keep things going till they pick back up again, which is exactly what it did for me.
Applying For Credit
In order to get a line of credit you will need to get several financial documents together. Below is a short list of the things we had to have.
- 3 Years of business tax returns
- 2 years of personal tax returns
- A list of business assets
- Statements from any retirement accounts
After we applied for the loan we were able to qualify for a $35,000 line of credit which may not be a lot for most small businesses but when things are tight any little bit will help.
In the end a business line of credit saved my business from facing some really tough times in that moment of need and could have lost me a lot of business.
So how about you, have you ever considered getting a business line of credit? Share your thoughts and comments below.