What’s the backup plan when your business hits a slow season and cash might start to run thin? Even great businesses can go under due to not having a plan in place for a slow season. This is where a revolving line of credit can keep the lights on through a slow season, and where a company like 1800BizFund can help aid in the longevity of your company.
A revolving line of credit is an approved dollar amount that your business can take up to in the form of credit. With this model, you only withdraw what you need when you need it, and you only pay interest on what you take. It can help keep your business afloat if you have a slow season.
Rather than taking chances with banks and jumping through those hoops, or only being able to get up to $100k from other competitors, 1800BizFund makes it easy to apply, has more competitive rates, and can get you funds within 24 hours. Continue reading to see how a revolving line of credit can benefit your business.
How Does It Work?
When it comes to getting a line of credit, you will have to meet certain criteria when you apply, and those criteria will change depending on the lender you are using. Lenders want to see a business that has a promising future, regardless of prior struggles.
On average, you can count on the below criteria being a proper baseline on conditions you need to meet:
- Annual Revenue: Lenders need to see that you have positive cash flow coming into the business. It lets them know that you will be able to pay off your credit line. A typical bottom line revenue for approval is $120k per year.
- Credit Score: Almost a no-brainer, lenders want to see that you have a good credit score. If there was a dip but you’re back on track, most understand things happen in business. A FICO score above 700 is even more helpful alongside a good credit score.
- Business Age: How long have you been in business? How long has your business been profitable? Lenders want to see that you can navigate the waters of owning a small business, because they’re risky investments. The longer you’ve been in business as well as being profitable, the higher your line of credit might be.
Yes, there are requirements for approval, but they are a good metric for lenders so that they know how much risk they’re willing to take on. Numbers never lie, but having the team to get the job back on track and complete will also go into the decision making process. Remember these are benchmarks and will get you started, but if you want a higher line of credit, then you might see how far past these numbers you can get before applying.
How It Can Save Your Business
How many businesses do you hear about that never had a slow season? None. Every business is going to have its struggles, its fast and slow seasons, and some scary points. Running a small business is risky, so you need to try and foreshadow as many potential threats as possible, and come up with sound plans for those threats. Hopefully they don’t happen, but things happen in business.
Something happens in your supply or manufacturing lines, the sector of a market crashes, business just slows down for a few months. A revolving line of credit can help get you through those times. With 1800BizFund, you can get approved for up to $500k, which can help you cover expenses and keep your business going until things pick back up again.
With a line of credit, you can count on having the funds in order to:
- Process payroll
- Cover expenses like rent, utilities, maintenance
- Hire more staff if necessary
- Buy more inventory or supplies
- Use credit on hand to take part in bulk order discounts
- Cover miscellaneous things like late customer payments, machine going down, logistic mistake, etc.
If you’ve run a business long enough, then you know that literally anything can happen. Sometimes it’s hard to imagine even making up some of the things that might go a little bit sideways. One thing is almost always for certain: cash is king and can help solve lots of problems.
Do your business and yourself the favor of having a good line of credit if it makes the most business sense. You should also do your homework on companies and lenders, as you don’t want to get stuck with a bad term and an awful interest rate. This is another partnership, and you want to make sure they have your best interests in mind, and not just their own. The better you do, the better they do. And if that partnership becomes long-term, returns for everyone will also increase.
Conclusion
A lot of good things can come from opening a line of credit, but it’s important to know that your business absolutely needs it, as well as it being able to be paid back. Being able to take what you need, and only paying interest on what you take, are attractive components of a revolving line of credit. Having a good reputation with lines of credit will prove to be fruitful down the road, especially if you have plans on scaling your business.
At the end of the day, what you need is a good plan, backup plan, and backup plan for that. Business is risky and never risk-free, but you want to try and hedge certain bets as much as you can. Running out of cash is not a point you want to hit. That’s where credit and 1800BizFund come into the picture.
1800BizFund knows what it takes to run a small business, so we know how to best accommodate our fellow small business owners. Give us a shout and let’s see how we can help you and your business.