How to Use Credit in Your Small Business


Credit can be a useful tool for small businesses, however something like sage 200 may not be practical for a small business. It allows you to borrow money in the short term, without having to provide collateral as security. This is not something that should be taken lightly, however – it’s important that you understand how credit works before making any decisions about using it. In this post we’ll go over some of the basics and give you an idea of what kind of loans are available for your business

What is Credit?

Credit refers to borrowing money from someone. Usually, people borrow money using collateral (like a car) as security – this means that if you don’t pay back the loan, they can take your property away and sell it in order to make up for what you owed them. When applying for credit with small business loans, there’s no need provide any collateral! All they’re looking at is whether or not you are likely to repay the debt over time. They’ll also look into where all of your income comes from.

Having credit as a small business makes investing in vital equipment and tools for your business easier and at a budget friendly rate.

For example, you could have a business where you’re often working with fire. Being able to kit out your premises with a fire extinguisher or other fire equipment could be beneficial with the use of credit, meaning you can prioritise employee safety and not take a huge chunk out of your marketing budget. Or you could be a gluten free supplier utilising the use of credit to reduce the cost of your courier charges or to buy more stock.

Number one:

What kind of Loans Are Available For Small Businesses? The types of loans available for small business are made up of:

-Short Term Loans (paid off in a year or less)

-Long Term Loans (repaid over the course of two to five years)

-Lease Purchase, where you make monthly payments on something beyond your budget but then at the end of that term have ownership and can sell it. This is usually good if you’re buying expensive equipment which will generate money once bought. Example would be buying heavy machinery to cut down trees or buy industrial supply store items like paper plates when they go out on special!

Number Two:

How To Apply For A Loan? You might want to speak with a lender through phone call before applying online – this way, they know your intentions of the loan.

Number Three:

What Are The Risks To Consider?

-Interest rate. Generally, the lower your interest rate is, the better as it will have a lesser effect on your budget and cash flow in general. While you want to keep this low and manageable for yourself; there are cases where an individual might be offered a high interest loan because they can show that their income (or other factors) would allow them to repay said money with ease. In these circumstances, you may not get as much of a reduction in rates but at least some form of deal has been reached!

-Length of repayment period – understanding the length of how long you’ll be paying off a loan for is important for. If you only have a small amount of money to work with, then it is possible that your monthly repayments won’t be too much. This means that should the need arise for extra expenses and/or emergencies; this would allow some degree of leeway without risking debt or financial stress. It also means that if there’s an opportunity where you can make more money by taking on another job or working harder in your current one – you’ll be able to do so as well, instead of having to take time off from work due to being unable to afford childcare.

-Interest rates – interest rates vary between different lenders so always keep an eye out for what they are before making any decision!

Number Four:

How to pay off a loan quicker

-If you’re looking to pay off a loan quickly, it is important that you make at least the minimum monthly payment on time.

-It’s also good to keep in mind what your overall intent with this loan was – if it was for assistance getting started and now you feel more confident about owning your own business, then taking out another one might not be the best idea.

Number Five:

What are some of the benefits?

-One benefit being that when applying for credit, there will be less paperwork involved than going through an application process (which can sometimes take weeks). It’ll allow small businesses without much capital to get their hands on some cash as well as allowing them to spend money where they need/want too.