The nature of money in business is that is it very fluid. It comes and goes at a fast pace that can be hard to keep track of. Cash flow issues are common for business owners; you aren’t the only one! Because money doesn’t come in at the same rate it goes out, businesses often find themselves stuck without enough cash on hand to pay vendors, employees, taxes, etc. This creates the need for a business to borrow money in order to meet their financial obligations.
If you are seeing an increase in vendor debt, frequent bank overdrafts, or have been late paying your taxes, then you probably have negative cash flow in your business. The solution is a line of credit.
The most basic definition of a line of credit is a pre-established amount of credit extended to a borrower by a lender that the borrower can draw against as needed. It’s funds you can draw on when the in-flow of cash is tight, evening out the time between you paying others, and getting paid yourself.
A line of credit can come in different forms. Most commonly known is the traditional line of credit obtainable at your bank. However, if you’ve been struggling with negative cash flow, some consequences can negatively affect your credit. This in turn affects your likelihood of being approved for a traditional bank line of credit, since approval is based primarily on credit scores. Many business owners today find themselves in the position of being unable to secure financing through their bank because of “bad credit”.
The good news we have is that there are other ways to get a line of credit. Factoring and asset-based financing are just two examples of strategies we implement to help our clients successfully secure the credit they need. If you need the flexibility of a line of credit for your business, but have been denied by the traditional sources, don’t give up! There is a solution for you, and we can help you find it.