When is the Best Time to Get Lines of Credit for Your Business?
The simple answer: as soon as you can qualify. The great thing about lines of credit is that you do not pay any interest until you actually use the money. So why do businesses…
The simple answer: as soon as you can qualify. The great thing about lines of credit is that you do not pay any interest until you actually use the money. So why do businesses wait until they need money to actually obtain them? It is a practice that has caused businesses to literally close their doors.
Let’s first take a look at the bad side of reality. If you are in need of money, there could be a couple of things happening. You may be overextended on your already existing lines. Your cash flow may have taken a hit. Perhaps your business is seasonal. You may have made some mistakes that need correction.
On the good side, you are growing, have cash flow, have history, and are in the expansion process. Which side do you think is more likely to get the cash they need?
A lender is in the business of being paid back. The less perceived risk that they have, the more money that they are willing to give. The problem that a lot of businesses face is that when they really need money, there is more risk. This results in denials, hard inquiries, and in turn leaves you with no options for months to come.
The Solution
Plan ahead. Secure your lines of credit when you don’t need the money. This establishes contacts and allows you to start to build relationships with the lender’s. Now when you do need to actually use the money, you already have it available, or if it isn’t quite enough to get you what you need, you have a history that will make them more comfortable to take that leap of faith with you.
Markets change. Storms surge. Businesses have to be able to manipulate and adapt to an ever changing environment. It is hard work and having credit available is never going to hurt you. No one can predict the future.
Another very important aspect is that establishing a history with lenders makes your company more valuable. You should always have an exit strategy in business. One of the strategies commonly used is selling the company. A business with history is worth more than a business with no credit. That’s a fact.
Don’t put yourself or your business between a rock and a hard place. Secure your future by establishing your lines of credit as soon as possible. Then continue to increase the lines.
Related desks: Building business credit