Credit products for your business – Merchant Cash Advance
Do you contemplate choosing a credit product for your business? If so, you should know the differences between a credit line and a commercial term loan. Each one helps you in different ways. For this reason, it is important that you listen to your banking officer carefully, so that you choose the product that really meets your financing needs.
Line of credit
It is usually granted to finance accounts receivable or payable. Opting for one is ideal to help close the gap that may exist at a given time between charging customers and paying suppliers to a business.
They are granted in the long term or for a term greater than one year. They are used to finance assets that support business operations such as the purchase of equipment, property and vehicles, as well as improvements to the facilities. In this type of loan there is also financing for permanent working capital. This type of loan is a monetary injection through a debt that is granted to stabilize business finances or give it a boost to continue operating or growing.
Both the credit line and the term loan are useful tools to help establish and give continuity to a business. Of course, if you do not receive proper guidance as a business owner and use these tools for the wrong purposes, it can result in a destabilization of the natural cycle of business finances.
For example, requesting an increase in the credit line limit can be disadvantageous for the business because it would increase the monthly payment of the line. In addition, the cost or interest rate of a line of credit is generally higher than that of a term loan, just as the interest rate of a credit card is higher than that of a personal loan. In this case, it is advisable to grant a term loan to reduce the balance in the line of credit and reassess your limit.
On the other hand, economics experts recommend that, at least once a year, the credit line balance be reduced to zero to prevent the total debt of the business from increasing. If, as a business owner, you succeed, you would avoid the negative effect on the business cash caused by the increase in business debt and the consequent increase in the interest on loans.
Business owners like you have the best partners for your business in bank officials
It is they who can guide you to achieve success. And is that as financial advisors, bank officials are able to see “the complete picture” of the situation and recommend what is best for your business in the short and long term. Therefore, listen and maintain good communication with your bank officer, so that together, they can choose the best credit product and thus have a better chance of success.
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