If you’re a small business owner, at at least one point in your career, you’ll find yourself in need of cash. Whether you need to fix a big appliance to keep your business running or you need to do a small bathroom remodel, having cash flow is important to get these things done.

It can be challenging to free up cash to make a fix or upgrade though. Often, small business equity is tied up in noncash resources. How can you get the cash you need to make the changes you desire? 

A Line of Credit Can Provide a Safety Net

A business line of credit can greatly benefit you in these situations. It can provide a safety net if you end up in a situation where you’re short on cash. It can also help you take advantage of a growth opportunity. 

A Line of Credit Differs from a Bank Loan

What exactly is a line of credit though? A line of credit is a set amount of money that you can take from the bank when you need it and pay it back when you are no longer in need. It’s great for one time purchases and expenses, since the credit line can be repaid at any point in time, unlike with a bank loan. 

Bank loans are different, because they have fixed monthly payments. Also, bank loans are not revolving. This means that with a bank loan, once you pay the money back, you can’t access it again. A line of credit is revolving, meaning once you pay back what you owe, it becomes accessible to you again. There will still be a timeframe and credit limit outlined in your agreement. 

Benefits of a Line of Credit

Whether it’s a safety net that you need or just a little added flexibility, a line of credit can be of huge benefit. You can draw funds whenever you desire and draw the exact amount you want. It saves you from having an influx of cash capital sitting around waiting for the occasion to use it, like with a loan where you get all the approved money up-front. 

Check the Fine Print

Sometimes lines of credit come with a price, like an origination fee, withdrawal fees or maintenance fees. You’ll also need to look out for interest rates, as these can be higher than with fixed term loans. Check the paperwork and the terms before signing up to anything.

You may also need a credit check or good credit history before being approved, though this varies from loan to loan. Some companies are more strict than others, which is why it’s important to look at what you’re signing up for before you pen your name. 

Once you know the terms, consider letting a fixed line of credit help you when you’re in need of cash. It’s a safety net that will be of great benefit later down the road.