One element that can mean the difference between the success and failure of any business is its ability to manage its cash flow. Timing can be everything in certain situations and a secured line of credit can ensure a company's ability to take advantage of that timing. Corporate credit may not be available as quickly as the small business owner may require it to be in order for him to take advantage of a brief opportunity to expand. He may come across a stockpile of some supply he needs to create his own product, and that supply is available at a generous discount that he simply must take advantage of. An already acquired line of credit can ensure that funds are available for such an activity, or it can keep the money flowing when sales are low or revenue receipts drag.
Many new businesses are slow getting off the ground, and may experience a delay between initial sales and the receipt of payments for their products. That may cause a business to experience difficulty in meeting payroll or paying its utilities or rent on its building. A secured line of credit can assist in this situation as well, provided it's already in place. New business owners would be wise to secure such credit early in the life of their busy.
Once secured, a line of credit can be as easy to use as a credit card. The business can write checks against it and is charged interest only on the amount of money that is actually used. The full amount of the loan is placed in a fund, but the borrower only pays interest in the amount that he spends. The amount of the monthly repayment is based on the borrowed amount, and usually allows for a minimum payment. That is true flexibility.
How can a lender afford to offer such flexibility? Any lenders ability-and willingness to extend such loans-lies in the security offered by the borrower. "Secured" means that the borrower has offered some asset of the business to back up the money he borrows. That asset might be a piece of equipment such as a hydro-jet sewer cleaning machine for a small plumbing business. It might be the building out of which the business is run or the inventory used to create that business's product. It might even be the accounts receivable of the business. Any asset of value can be used to secure this type of loan.
A secured line of credit gives the lender the confidence that even if the borrower cannot repay the loan, most of the investment can be recovered. The asset can be confiscated and sold to recoup the invested amount. But most borrowers follow through on repaying their loans because they are good credit risks. The loan would not have been offered to them in the first place if the lender's research hadn't found them worthy of the loan.
So what is involved in acquiring a secured line of credit? There is usually an application fee and an approval process through which to grow. Of course the approval process will include a credit check on the potential borrower. It may include research on the part of the lender into other aspects of a company's financial records as well. This could include information on how much money the business may owe to other creditors. But these steps are generally manageable by the borrower, and a small price to pay for acquiring a stable line of credit.
Corporate Credit Concepts specializes in Secured Line of Credit. For more information Secured Line of Credit and how it might benefit your business, please CLICK HERE for a free phone consultation.