American Finasco > Blog > Small Business and Personal Lines of Credit

Why you would want personal lines of credit as a small business owner?

Most people only apply for a loan when they need money for a specific purpose.  It’s what we all learned to do, but sometimes, it’s too late.  As a business owner, you should be constantly looking for low-rate personal lines of credit.  Think of applying for a loan when you don’t need the money, as a safety net for when you do.

 Apply for Lines of Credit that you don’t need

If you are fortunate enough to be in a strong financial position, take advantage of it.  Go into a bank and apply for a personal line of credit that you can use for investment purposes or in extenuating circumstances for your business.  When you don’t need the money is the best time to obtain a personal line of credit. Then, when an opportunity arises, or if something devastating happens and company funds are limited, there will be a ready resource available.  If you apply at multiple banks at the same time, you could get the lowest possible rate because they will compete with each other.  Sometimes, it takes a while to get approval, but if funds aren’t needed immediately, it’s worth the wait in the long run.

Personal lines of credit are infinitely more simple than commercial lines.  It is an easier application process and often, collateral is not required and there are no reporting requirements.  Many business owners don’t want to mix personal finances with business.  However, if the owner personally guarantees business debt then there is not much difference.  Even if you have valid reasons, a personal line of credit can act as a lifeline for the business in need so it is a good safety net.

Loans are hardest to acquire when you need them the most

If you are having financial difficulties for whatever reason, applying for a loan in this position may look like a bad credit risk to a bank. The institution will worry that even with a loan, you won’t be able to bring in enough business to pay back the loan on time. Or, if you have never applied or received a loan for the business, you will lack a credit history that gives financial institutions confidence in your ability to repay.

However, if you have obtained several lines of personal credit, you have a fallback plan. Even if your company is in great financial shape, company funds may be tied up not allowing you to take advantage of an excellent investment opportunity. This is another example where a personal line of credit will give you a financial edge. Good credit, personal lines of credit, and exceptional relationships with your banking partners will help carry your business through temporary downturns or help you grow.

Access to capital

The number one complaint from small businesses during the pandemic regarded government lockdowns keeping people away from their business. The second was a lack of access to capital.  While Covid impacted many businesses greatly, those who had personal lines of credit were able to survive and have had an easier time bouncing back.

If you find your small business in debt, there are solutions. By leveraging American Finasco, your debt can be managed, reduced, or consolidated while you stay focused on your business. Visit Contact Us and complete our Online Form for a free consultation or call (800) 299-2909. We look forward to speaking with you.