Christian Small Business Line Of Credit
Many entrepreneurs use a Christian small business line of credit to sustain their growth or take their company or product to a new level. Often, a little extra cash is needed to meet short-term financial needs such as purchasing materials to stay ahead of the competition or bridging the gap between buying and selling inventory. If used properly, this special type of loan can allow them to continually borrow only what they need up to a defined amount determined by a lender. Interest is charged only on funds used and company financial worth is built as payments are made in a timely and regular manner. Improved ratings will give these small companies greater access to larger pools of funding in the future as a product or service continues to grow and develop.
Like many forms of borrowing, a small business line of credit can be secured or unsecured. Lenders are typically more flexible with lending monies that are secured through property, inventory or accounts receivable. Rates are generally lower and more competitive than unsecured loans, which are riskier for banks and lending corporations. With secured assets, lenders are more assured that they will be able to regain their assets if the borrower doesn't repay what is owed. Therefore, unsecured loans often have more restrictions, higher interest rates, increased application fees and are generally more difficult to get - especially for the small business owner who is just starting out or is still unestablished. But since no collateral is required, this alternative will not threaten the personal property or store front that may need to be secured against a small business line of credit.
When starting out, most small entrepreneurs have not yet established a valid company financial history. In the initial stages, personal credit must be used. Start up costs can be high. This is not the time to seek a small business line of credit. For long-term financial projects, such as securing property, purchasing main equipment, and continuing to pay employees, loans are a better alternative. Loans can be repaid over longer periods of time, have lower interest rates, and enable individuals to borrow greater amounts of money. This can seem like a great risk, but God promises to take care of those who step out in their calling. "Wherefore I put thee in remembrance that thou stir up the gift of God, which is in thee by the putting on of my hands. For God hath not given us the spirit of fear; but of power, and of love, and of a sound mind." (2 Timothy 1:6-7) He keeps working in and through individuals to make them "perfect in every good work to do his will..." (Hebrews 13:21).
As small companies begins to flourish, it is important to establish it as a completely separate financial entity. Taking out a loan every time funds dip is not very convenient. Personal credit cards are very expensive. Even business cards with lower rates may not be very economicable. A small business line of credit can come in very handy. Once some financial history has been established, this type of borrowing can be very easy to obtain. Most lenders may require a guarantor or co-signers at first, but as a history develops, the company can stand alone. Interest rates are generally much lower than standard credit card rates, but higher than business loans. The best time to apply is actually when company is going well and not struggling The company struggling financially. Repaying monies borrowed will not stretch available funds. Eventually the season will come when a credit line will be an asset to the company. If managed properly, the business will have built a positive report with the bank or lender and the line will have grown.
The best place to begin inquiring about a small business line of credit is with a bank where the owner is already established. Lenders will know the borrower personally and be more willing to approve funding. However, owners of small companies must research lending institutions thoroughly. Some banks or financial institutions will avoid certain industries or lending to small businesses altogether. Not every plan works for every owner so it is important to find a good fit. Some require complete repayment within a year. Others will allow interest-only payments for a specified amount of time. Check all options and consider the pros and cons before deciding on a lender.
To apply, these entrepreneurs must demonstrate a history of solid financial management and profitability to obtain a small business line of credit. This proposal will include information on assets and liabilities, current profit margins, sales projections, a balance sheets and a full business plan. Lenders will check an owner's financial report for any red flags. Applying to many institutions will only damage credit scores. Lenders who see many rejections on a history report are less likely to approve an application of any type. Most lenders require at least two years of solid financial history and profitable business for approval. Companies that survive the first two years have a great chance of surviving long term.
Obtaining a small business line of credit gives entrepreneurs the flexibility and cash needed to continue developing a solid, thriving company. However, lines of credit can easily be misused. They are not a solution for long-term financial difficulties or large purchases. However, this unique contract can be a cash source when needed when funds and resources fluctuate over the course of time. Plus, it can be a great tool to build up a credit history that can be used for future borrowing and business expansion.
Secured Christian Business Credit CardAn application for a secured business credit card is almost always completed for one of two reasons: to establish a credit history where none exists or to rebuild the company's creditworthiness due to a poor record of meeting obligations or a bankruptcy. The application will request such basic information as the company name and address, length of time in business, and the name of the actual applicant, for example the sole proprietor or the business partners. Financial information will also be requested before the application is approved. Company owners should shop around before submitting an application. Issuing banks offer a variety of products and the owners will want to find a secured business credit card with a low annual fee combined with an acceptable interest rate. Some banks may offer additional services with their cards, such as enrollment in some type of reward program, protection against unauthorized use and/or theft, extended warranties on some products purchased with the card, or rental car or some other type of travel insurance. By shopping around and comparing the different fees, programs, protections, and bank policies, the owners can get the best possible card for their company.
One drawback of a secured business credit card is that cash is tied up in a savings account with the issuing bank. Remember that the purpose of having a secured account is to either establish or rebuild a reputation for financial stability. Because creditworthiness has not been proven or needs to be improved, the issuing bank requires a deposit in a savings account equal to the card's credit limit. This money, which is often referred to as a security deposit, is what secures the purchases made on the account. If the company owner fails to make the monthly payments as required by the secured business credit card agreement, the issuing bank can access the funds in the savings account to pay off the debt. The money in the savings account, which may range anywhere from a few hundred to thousands of dollars, cannot be withdrawn by the owner without completely paying off and closing the credit card account. The money in savings is not used to pay the monthly bill. By paying the monthly bill on time every month, the company owner is building a positive financial record for meeting obligations. The monthly payments help to establish and rebuild creditworthiness. It's important for a business owner to have a reputation for honesty and reliability so, as Scripture says: "That ye may walk honestly toward them that are without, and that ye may have lack of nothing" (1 Thessalonians 4:12). Tying up money in a security deposit can be a drawback, though, because the cash cannot be used for running the company. This may not matter much if the security deposit amounts to only a few hundred dollars. But when $5,000 is tied up in a security deposit and isn't available when the business needs to buy new equipment, then the lack of cash flow may present a difficult challenge for the company owners. The priority remains, though, to establish and/or rebuild creditworthiness.
In addition to the above benefits of rewards, protections, and insurance, a secured business credit card may offer other beneficial services to companies. For example, one security deposit can serve as the collateral for more than one card. Though there is only one account, the issuing bank can provide cards for several employees. This can be a real benefit for employees who travel frequently or to separate the expenses of different departments within the business. Issuing banks often provide a breakdown of expenses by categories which can be very helpful when reconciling receipts and purchase orders with billing statements. The banks may also provide a year-end summary of all categorized expenses which may be a valuable tool when preparing annual financial reports. Another helpful benefit is that credit limits usually can be increased by depositing additional funds in the security deposit account. However, this decision needs to be weighed against the drawback mentioned earlier about tying up the company's cash flow. A third benefit is privacy. Nothing on the issuing bank's secured business credit card designates it as such. Company owners and employees do not need to be embarrassed about using the card. No merchant will know by looking at that piece of plastic that the company is in the process of establishing or rebuilding its creditworthiness. For a more professional image, though, the company may be able to get a piece of plastic that has the company name on the front. This is a new feature in the design of credit cards that many businesses, both new and old, will want to take advantage of as another way of standing out from the crowd.
Establishing a new business's creditworthiness doesn't necessarily mean tying up cash in a security deposit and getting a secured business credit card. Entrepreneurs with good personal credit should seek other alternatives first. For example, the entrepreneur's personal financial institution may have a type of starter account for new businesses. Another option is to apply for an unsecured card based on one's personal financial information. Entrepreneurs with an acceptable FICO score will almost always qualify for an unsecured card. One thing the Christian entrepreneur will not want to do is to use personal cards for business expenses. For income tax purposes, the expenses of the business should be kept separate from the expenses of the household. An unsecured account will almost always have a lower annual fee, or perhaps none at all, and a lower interest rate than a secured business credit card. They will also offer most if not more benefits and protection to their customers.