Leveraging Consumer Finance for Small Business Growth

When you run a small business, it can be tempting to open a consumer finance line of credit to get you through the lean times, but without the proper knowledge, a line of credit can be your downfall causing stress to your cash flow until you eventually go out of business. The following tips will give you suggestions on what not to do with your credit line so you can create expansion and success for your small business.


A Line of Credit Differs From an Installment Loan


Most people think of loans as a static amount that you borrow oncefrom a bank and then pay off in monthly increments until they’re paid in full. This can certainly be the case, especially with a mortgage or auto loan. However, business lines of credit are more closely related to a credit card in how they work. You’re given a credit limit that you can borrow against and pay off your balance as you’re able, keeping in mind the minimum monthly payment. They’re better for businesses who want to cover inventory or payroll issues.


What You Should Not Do With a Consumer Finance Credit Line


Don’t wait until you’re hurting financially to apply for a line of credit. As with any loan, it’s easier to get approval when you have funds to back it up. Remember that reputable lenders won’t charge much, if anything at all, to keep a line of credit open and available on demand. You’ll be glad you have the credit when you need it.


When opening a line of credit, you should always keep your end goal in mind. Don’t draw on it like petty cash; that will only get you into trouble. Instead, use it to purchase what you know will pull in enough money to pay it back with interest. Always go into it with a well-researched plan. On the other hand, don’t be afraid to use your credit. You can help fund expansion, inventory, payroll and whatever else you need to help your business grow.


Don’t rely solely on your credit funds for expenses. You should transition to cash flow for funding once your company is achieving high performance. You don’t want to get in over your head or max out your account. Pay with your cash and save your credit line to fund new and larger initiatives down the road.


Whether you have a new business or are looking to expand, a consumer finance credit line can help put your company on the fast track to success. When you can afford to bridge cash flow challenges, you’ll find that it eases relations with vendors and customers as well as lets you operate at peak performance.



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