Get Your Business Through Tough Times with a Business Line of Credit

By Kieran Daly, 17 March, 2023

Get Your Business Through Tough Times with a Business Line of Credit

As any successful business owner knows, you always need to have an emergency plan for when the worst possible outcome occurs. Essential equipment can break, cash flow can experience gaps, properties aren’t immune to damage, and accidents happen. What separates a great business owner from the rest is knowing how to lead through emergencies and having a solid plan that will keep your business afloat through the worst storms, but what are some of the ways to face unplanned roadblocks in operation?

Well, when it comes to the financing of your business, a business line of credit is a great tool to have readily available and may actually be the difference between your business floundering or surviving. 

What is a business line of credit?

A business line of credit is a type of loan offered by financial institutions to businesses. It allows them to draw funds up to a specified limit as needed, repay the borrowed amount, and re-borrow up to the limit as needed, rather than receiving the total amount of the loan in one lump sum. A line of credit is typically used for short-term working capital needs, such as managing cash flow or covering unexpected expenses. 

A business line of credit can be a valuable financial tool to help a business during an emergency situation. Here are some ways a business line of credit can help: 

1. Quick access to funds

When an emergency occurs you usually won’t have a lot of time to be reactive and secure funds. A business line of credit helps you be proactive with access to funds that can be used to address emergencies directly and as they occur.

The funds can be available within a short period, and they can help a business to respond quickly to an unexpected event, such as a natural disaster, a sudden drop in revenue, or unexpected expenses. The best part is, with Backd’s business line of credit, once you pay back the credit drawn, your balance revolves so that you have access to those funds again if another emergency occurs. The speed of accessing funds can help soften the blow in emergency situations without affecting your current capital. 

2. Flexible use of funds

When applying for funding, you will often have to stipulate what you are using the funds for, this can be an issue when building an emergency fund as you will never actually know what you need to use emergency funds for until the time comes. Luckily, a business line of credit, unlike a traditional business loan, allows a business to access funds as needed and use the funds for various expenses. 

This flexibility can help a business to cover a range of expenses during an emergency, such as rent, payroll, or equipment repairs. In an emergency, flexibility is key to ensuring that you are protected from a wide range of issues, which makes a business line of credit a must-have tool for your emergency plans. 

3. Lower costs

When seeking emergency funds or establishing an emergency balance, you don’t want to damage your stability with a high cost of capital. A business line of credit typically has lower interest rates than other forms of financing, such as credit cards. Lower interest rates can help a business save capital on interest costs, making it easier to manage additional expenses during an emergency.

In addition, with a business line of credit, you only pay interest on the funds that you withdraw. This means that you won’t pay interest rates when setting the amount aside for emergencies and will only have to pay the loan back with any cost associated if an emergency occurs and you use the funds. 

4. Control over cash flow

Even when you are not dealing with an emergency, you want to ensure that you have complete control over your cash flow. A business line of credit can provide business owners with the chance to take control over cash flow whether there is an emergency or not. 

A business can draw from the line of credit only when needed and repay the balance when its cash flow improves, reducing the financial strain on the business. Reducing any strain on your business is key in an emergency situation as it helps keep your business on a level footing so that it can bounce back and thrive in the future.

Using a business line of credit in an emergency

When unexpected finances arise or emergencies occur, the speed at which your business adapts and responds is key to ensuring your continued success. A business line of credit can provide a safety net for your business during these times by allowing you to respond quickly and efficiently without taking on expensive debt that will bring your business further down. It can be a valuable financial tool that provides businesses with the flexibility and financial resources they need to survive a crisis.

The withdrawal nature of a business line of credit makes it the perfect tool to set aside until you truly need it but it is not limited solely to use for emergencies. Business lines of credit can cover any range of situations that your business may need additional capital for, but it is always important to ensure you have a financial plan in place for how you wish to use it to avoid drawing more than your business can afford, especially if you wish to use it as an emergency fund.

Backd Business Line of Credit

Regardless of if you are creating a strategy for emergencies that could arise or just simply need capital to help with short-term needs like payroll or equipment purchasing, Backd’s business line of credit is the ultimate tool for your business. 

Backd offers business lines of credit ranging from $50K up to $750K, with 6 or 12 months terms. The only requirements are that your business has been in operation for a minimum of two years with $50K in monthly revenue and a personal credit score of 625 or higher. 

Don’t wait until an emergency to get the capital that your business needs today. Apply in just three minutes to get Backd today.