For SMBs one of the most significant challenges – especially in the early stages – is managing business finances. Managing growth and having a positive cash flow is essential to business success, so utilizing business credit wisely is also crucial. Business credit is essentially borrowing money for business purposes and includes business loans, lines of credit, and business credit cards. It can be used for a variety of purposes such as boosting cash flow, financing growth, or claiming tax deductions. For small and medium-sized businesses there are a few different ways you can utilize business credit wisely.
A business loan should typically be used for large, one-time expenses, such as equipment or property purchases. A business loan can give you the boost you need to stay afloat or expand. And, unlike personal loans, business loans are tax deductible. So, if you have a significant expense coming up – like new equipment or inventory – a business loan may be the way to go.
Business Line of Credit
On the other hand, if you need access to smaller amounts of money on a more regular basis, a business line of credit may be a better option. This can come in handy for things like unexpected repairs or seasonal fluctuations in inventory. Just remember to only borrow what you need and to keep up with payments – otherwise, you could damage your business credit score.
Business Credit Cards
Finally, business credit cards can be a helpful tool for everyday expenses, such as office supplies or travel costs. They’re especially convenient if you have employees who need to make purchases on behalf of the business. They can also help build a business credit history and improve your business’s credit score. Just be sure to track card spending and pay off your full balance each due date to avoid paying interest on your balances.
Business credit can be a valuable tool for SMBs. When used wisely, it can help your business succeed. So, if you’re looking to take your business to the next level, consider utilizing business credit. Just be sure to choose the right option for your business needs and to manage your credit responsibly.