Types of Credit That Help Business Owners Manage Cash Flow

by Kristen White Blogger

Regardless of what type of business you own, you need to invest a lot of capital to operate it successfully. However, you also need to maintain and manage cash flow effectively. This is why many business owners rely on various types of credit. Some common types of business credit include loans, credit cards and credit lines. When banks and suppliers receive your application, they will order business credit reports online. This is a summary of how each type of credit works.

A Business Credit Line: Provides you with the opportunity to borrow money in the future. You are approved for a specific credit limit on your account, which indicates the maximum amount that you can borrow. For instance, if you have a credit line with a $5000 limit, that is the amount you can borrow, and you only pay interest on the amount you have borrowed.
Business Credit Card: Business credit cards are used to pay for the day-to-day expenses, and can also be used to borrow money. Your business credit card balance does not impact your personal credit history. However, you will be personally responsible for the debt. Business credit cards offer additional benefits that personal credit cards do not offer such as:

They help you separate your business expenses from personal expenses to make it easier to maintain precise business records and organize them before filing tax returns.
You can order employee credit cards that are tied to the business credit card account so you can limit how much the employees spend and where they can use the card.

Business Loan: A business loan allows you to acquire the total amount of money that you would like to borrow and repay the amount with interest over time. There are different types of business loans catering to different needs of the business. The amount you borrow, interest rate, and the loan tenure depend on multiple factors including:

Your business credit history
Your personal credit history
The lender
Your business plan
Your business revenue
How long you have been in business
The collateral situation of your business

You need to maintain steady cash flow to run your business efficiently. As your business grows, your need for more capital and resources also grows. So, it is important to maintain a good credit score so you can be approved for loans, credit cards and credit lines when you need them.