11 Reasons Why Small Business Owners Should Consider Taking a Line of Credit

Whether your small business is just getting started or has been operating for a little while, cash in hand is vital to ensure that you accomplish all your goals. Most small businesses require capital for starting up while existing business need money for growth and expansion.

To sustain your business, you may consider dipping into your personal savings, look for investors, or get lines of credit (LOC).

Lines of Credit - LOC

Here are 11 reasons why you need to have quick access to cash

1. Draw funds whenever you need it

Unlike loans, lines of credit allow businesses to draw their funds whenever they need it instead of taking out a lump sum from the beginning. (This can mainly be true with business lines of credit obtained online.) Whenever you feel you are in a fix and require working capital, you can get on your computer and initiate the loan from available funds. This is priceless for any business owner, especially when you need cash to take care of urgent matters.

2. Assist in fulfilling your short-term goals

You can use a line of credit several times, and you can also get approval even before you need the credit. It is not a must that your line of credit serves just a single specific purpose. This makes business lines of credit an excellent short-term solution for covering a variety of things in business, for example, renovations, marketing, purchasing inventory, or payroll.

3. Get lower interest rates

Getting affordable interest rates on credit taken is essential for your business, especially those that are just starting up. This is because you need to keep your expense down and maximize your profits. Lines of credit usually carry lower interest rates because unlike loans they are not interest driven. Furthermore, you can easily shop around and find a lender that offers the lowest interest rates.

4. Revolving LOCs

With revolving lines of credit, business owners have the opportunity to utilize it as many times as they require it. Revolving lines of credit are not one-time loans. When businesses use up their entire loan limit when they begin making payments, the money becomes available to them again. This is an excellent option for small companies because they are assured of continued working capital that will cater to the needs of their growing business.

5. You only pay what you have used

With a line of credit, a business is only required to pay up the amount of cash that they have used and not the entire amount that was approved. A line of credit is similar to a credit card, where a lender will give you the credit you want, and you can access it whenever you want to. This means that if you never used up the entire amount for whatever need you had, you will only pay back interest on the amount you spent.

Save money

6. Greater capital control

Traditional loans will provide businesses with a lump sum loan that must be paid over a specific time frame and at a fixed or variable interest rate. This is unlike the business line of credit, which permits you to tap into your funds whenever you need them. This gives business owners control over the amount of credit they can take and when they can take it. This means that you will have greater control of your business finances and you will have the freedom to make critical growth-driven decisions.

7. Cater for expenses anytime and anywhere

Business lines of credit can enable you to cater for any unanticipated costs or future expenses that you may need assistance with. You will always have funds with the lender that you can access whenever you need money. This is because you are not forced to initiate credit for the entire amount that the banker has approved you for. You will never have problems not paying your expenses because your funds will be ready whenever you need them.

With this financial product, you will have the flexibility and comfort that most traditional banks do not provide.

8. Can be unsecured

Your business LOCs can be unsecured. This means that you will not require collateral to get the financing you need. With an unsecured loan, you will have less risk, especially when you default on the loan payments. When you default on unsecured loans, the banker will only increase your interest rates. This is unlike secured loans where your assets are seized by the lender to cover the loan that you took.

9. Build business credit

A business must have a credible history with the business credit reporting agencies. If you want to build the credit score of your business, then taking a line of credit can help you. Making timely repayments will positively reflect on your credit score, and it can enable you to get a more significant line of credit in future. You will also have a clean report and may not have problems getting loans from major banks and financial institutions.

10. Separate your business and personal expenses

One of the most significant challenges that most small business owners have is keeping their business expenses and personal expenses separate. A line of credit is dedicated to your business, and this will allow you to streamline and track your expenses. This means that you can easily separate your personal finances and your business finances. This is important because you can quickly determine the flow of money into your business and your expenses.

Getting business loan

11. Flexible payment terms

The conventional term loans require businesses to pay set monthly premiums without fail. This can be quite a challenge, especially for start-up businesses that have not been in operation for an extended period.

With a revolving LOC, entrepreneurs can get flexible repayment terms. When a company experiences a slow month, they can pay the minimum amount due rather than the fixed monthly amount that traditional loans require.


Many businesses may experience cash flow problems at one time, and access funding is crucial to the success of any business. However, different types of financing have different pros and cons that must be considered. A revolving line of credit is one of the best ways that you can secure funding for your business.

Unlike other types of credit, business credit lines provide a myriad of benefits when compared to different styles of funding. Consider taking business lines of credit for the success of your business.