Apply for a line of credit before you need it. It can take some time to apply and get a line of credit; if you’re considering doing so, apply for a line of credit now, especially if you’re considering starting a new business.
A line of credit is a predetermined amount of money that a banking institution sets aside for your use. For example, you may apply for a line of credit from a bank, which grants you a $5000 line of credit. You will gain access to this $5000, but, much like a credit card, you are only charged interest on the amount you use.
All lines of credit are not equal. Much like everything else in the financial world, rates can vary greatly. While it’s a good idea to start with your own banking institution, do research. Before signing on with a lender, contact a number of banks and lending agencies; compare rates and terms.
Lines of credit are generally preferable to credit cards because line of credit interest rates are usually lower than credit card interest rates.
When you apply for a line of credit, you may need:
- The reason why you want to apply for a line of credit;
- A list of your assets and liabilities;
- A letter from your employer, stating how long you’ve been employed and the terms of your employment; and
- Other personal details.
Applying for credit can be a wise decision when managed responsibly. In fact, one of the top reasons that small businesses fail is a lack of cash flow to get them through lulls in the market or times of redevelopment. Apply for a line of credit today.
Remember, ConsultantJournal.com and its contributors only provide general information, not advice. Talk to a financial advisor, accountant and lawyer if you need business advice.