business line of credit

COVID-19 has disrupted the global economy and created a ripple effect all over. The significant reduction in the demand, restricted supply chain, and national lockdowns, have pushed the economy in the contraction phase that is likely to continue during the subsequent months as well. With little to no income and continuing costs, the exaggerated business concerns are about finding ways to revive businesses and keeping operations afloat with the amount of credit available.

Amid the acute liquidity crunch, businesses need answers on how to mitigate the risk of staying standstill, or worse, saving from a collapse. Companies are looking for easy and low-cost loans to buy raw material, to retain or hire talent, to pay pending bills, and to kick-off their businesses. In short, they need credit that would crane up their business operations once again. As the situation evolves, many companies units are still unsure about their contingency plan and what steps to take to maintain necessary funding for their business. Honestly, it would be slightly moving out of your comfort zone, still it can see the daylight.

The need of business line of credit

For the foreseeable tomorrow, some of the business operational expenditures will remain constant, while other expenses will be in total flux until the pandemic phase continues. The uncertainty about the availability of funds can impact the bottom line of companies, their employment decisions, and also their capacity to ride over the crisis. When the cash dwindles up to the situation where the business could go insolvent, that’s when the owner should think about drawing a business credit line.

Entrepreneurs are employing credit strategies to bolster the current cash position by keeping their long-term business interests in mind. Depending on the operational structure of the company, owners are becoming more prudent and finding new borrowing options, including a business line of credit.

Knowing Line of Credit

A business line of credit is offered to meet the small-term financial need of a business. Small, medium to big borrowers are looking for funds in the form of guaranteed emergency credit lines to mitigate the situation of the cash crunch. Liquidity starved entrepreneurs are relying on non-banking lenders to provide a COVID specific credit line. A business line of credit allows you to access funds for business-related activities. It comes with built-in flexibility and choices on what, when, and how much to borrow, along with when and how to repay. Also, once you repay, you can borrow again as long as you repay on time and do not exceed your credit limit.

Business credit cards are also considered a credit line, but they work best for either a new business that doesn’t have a much-established finance, or little ongoing expenses of the established business. For more mature and larger working expenses, a line of credit works the best.

Getting a Business line of credit from Private lenders

A line of credit provides higher credit limits and may be secured by collaterals. Traditional lenders such as banking institutions, require a stronger revenue base with some years of record to qualify for a line of credit. However, private lenders can provide some relief in regards to that.

Moreover, during COVID times, some of the Non-Banking Financial lenders have relaxed the conditions of mandatorily furnishing one or the other detail. Such relaxation is offered in the backdrop of the visible impact of extended lockdowns and resulted in slowdowns on economic activities. Furthermore, companies would take a while to return to normalcy, deploy their operations, earn revenue, and pay back loans.  Entrepreneurs facing finance shortage can easily qualify for a business line of credit with private lenders, provided they meet certain sets of variable conditions like being in business for minimum of 6months, good credit score, or annual revenue. However, the set of conditions vary with each lender.

To muscle up the receivables by corporations, the credit line is a hope. Amid the mixed signs in the market worldwide, non-banking lenders tend to bring back troubled businesses from fallout zones. With lesser restrictions and more credit limits, a line of credit can give the right stimulus to a wide range of borrowers, from small merchants to business giants.