Revolving credit can be a blessing or a curse and different business owners and financial experts have differing opinions about the beneficialness of a revolving credit. Radeya Global Blog spoke to several experts about what they thought of revolving credit and their advice on using revolving credit wisely.
Small businesses and new startups often have difficulty obtaining funding to grow their business or use for business operations. This limitation can result in stagnant growth, financial burden on the business owner, and even business closure.
Because a new business doesn’t have a revenue or credit history or a large capital structure, it doesn’t have the same ease as a well established firm to obtain a bank loan or investment funding quickly during critical times. A revolving credit can provide needed funding for a startup. Revolving credit, also known as a business line of credit, allows a business to borrow funds from a bank, credit union, or lender up to a set credit limit.
Unlike traditional loans, in a revolving credit the loan amount isn’t given upfront by the financial institution. Instead, the business is given the option to obtain funding up to a set limit when they need it. In this way, businesses can manage their operations with greater freedom while not having the burden of large amounts of outstanding debt.
“Since entrepreneurs tend to be more optimistic than is reasonable, they may use revolving credit unwisely, putting themselves and their startups into greater stress and financial risk.” ~ Kokab Rahman
New startup cash inflows and outflows are usually not in line. Sales may be on credit while expenses and supplies need to be paid for instantly, which means the business may have trouble making expense payments. With a revolving credit, a business can borrow funds to pay for expenses and operational costs and then repay the loan when cash is received from customers. For example, a business might borrow from the credit line to pay for marketing and then repay the debt from the sales revenue.
In this way, the business can increase sales and market reach which might not be possible without access to the business line of credit.
Nonetheless, having access to a credit line can make a startup owner reach for the available cash without careful thought. If done irresponsibly and without a plan, this can create financial problems instead of solving a cash flow issue. Since entrepreneurs tend to be more optimistic than is reasonable, they may use revolving credit unwisely, putting themselves and their startups into greater stress and financial risk.
Tyler Garns, International Speaker and Founder and CEO at Box Out Marketing, says, “As a business owner, I believe that revolving credit is needed by a company that may have low cash balances to support its net working capital needs. It serves as short-term financing that is usually paid off quickly; it is most helpful for operating purposes by any company experiencing unexpected significant expenses.
“In my experience, [the upside of] having a revolving line of credits is that the approved maximum amount of credit is available once needed. You don’t need to encounter a long approval process, and also it can be asset secured using collateral types such as equipment, real estate, and other valuable assets. However, the downside is many revolving credit lines have commitment fees and have higher interest rates than usual installment loans. For me, the effective way to manage cash flow is by negotiating payment terms with suppliers. Flexible payment options are better than bottom-shelf pricing.”
“You don’t need to encounter a long approval process, and also it can be asset secured using collateral types such as equipment, real estate, and other valuable assets.” ~ Tyler Garns
Connect with Tyler Garns on Twitter.
Melanie Musson, Finance Expert with Clearsurance.com, says, “You can’t deny that with a business line of credit, there is a risk. However, the point of the line of credit is to do things to improve your business that will make you more money. With the risk, though, there is the potential for reward. And for a startup, that reward could revolutionize the business profitability. A business line of credit streamlines the growth process for a small business. Instead of having to get loans for every individual investment or step of growth, the company can draw from its line of credit.”
“Before you jump in and utilize a line of credit, ensure you know that how you plan to use the borrowed money gives you the best possible probability of a good outcome,” advises Melanie. “For example, if you have to choose between a new carpet and hiring another employee for your internet-based business, the new employee will increase your growth potential, whereas the new carpet will only improve your personal experience.”
“The point of the line of credit is to do things to improve your business that will make you more money. Instead of having to get loans for every individual investment or step of growth, the company can draw from its line of credit.” ~ Melanie Musson
Maria A. McDowell, Founder of EasySearchPeople, says, “Revolving credit or business line of credit allows a business to borrow funds from a bank, credit union, or lender up to a set credit limit. However, the funds are limited in that a business can only borrow up to the credit limit, and then must repay the outstanding balance before borrowing the same amount again. If a company has a bad credit history or if they were unable to pay off their revolving credit initially, they could be prevented from getting a business loan in the future. It can be a blessing because it allows a business to borrow money as needed and repay it right away. It can be a curse if a business is not responsible and cannot pay off their credit on time. When they don’t pay off the credit on time, the lender may deny the business request for credit again in the future.”
“If a company has a bad credit history or if they were unable to pay off their revolving credit initially, they could be prevented from getting a business loan in the future.” ~ Maria A. McDowell
Maria advises that, “Managing business cash flow is about being specific about your goals and setting a budget! If you don’t know where your cash flow is going, it’s easy to lose sight of the big picture. If you have too many expensive bills and not enough income, then you are going to need to develop a business plan that sticks to your budget, so you don’t lose out on any important payments.”
“If you’re going to be a successful business owner, you’re going to have to be creative with how you handle cash flow. You could find that you need to take out a loan or sell part of your business, in order to save it. If you want to turn your business’s future around, you will have to be careful with your cash flow,” says Maria.
Connect with Maria A. McDowell on LinkedIn.
Daniel Chan, CTO of Marketplace Fairness, says, “A revolving credit can be a great way for a startup to get the funds it needs to get off the ground. It can be a blessing because it can help a company to avoid having to go to outside investors for money. It can also be a curse because it can lead to the company becoming indebted to the lender.”
Michelle Devani, Founder of lovedevani, says, that a revolving credit “allows for quick access to funds when needed and to bridge payables and receivables gaps, purchase equipment, cover seasonal or unexpected expenses, or capitalize on development possibilities.”
“Revolving credit allows for quick access to funds when needed and to bridge payables and receivables gaps, purchase equipment, cover seasonal or unexpected expenses, or capitalize on development possibilities.” ~Michelle Devani
Andrew Makhovskyi, CEO of Effy.ai, says, “When you’re just getting started, it’s impossible to have money prepared for everything. That’s why a credit or a loan can help a lot. The main point is not to take a huge loan. Take only the money that you need for basic purchases. Don’t invest in things too much or jeopardize your business because of the big credit installment. Instead, do some math before asking for money and try to return it as soon as possible. This gives you space to borrow more in the future, without worrying whether you’ll be able to pay it back.”
“The main point is not to take a huge loan. Take only the money that you need for basic purchases.” ~ Andrew Makhovskyi
Carter Seuthe, CEO of Credit Summit, says, “Revolving credit is a great option for businesses because it offers flexibility. However, with flexibility often comes carelessness with spending, which is what ends up hurting businesses in the long run. So, you have to be very aware of what you have already spent and owe before deciding on spending more. As long as you keep track of your credit and are making your payments on time, you should be just fine.”
Linda Chavez, Founder & CEO of Seniors Life Insurance Finder, says “A revolving credit can be a blessing for startup companies who need access to cash flow but it can also be a curse if the company is not able to manage its finances properly.”
Linda advises to:
- Maintain a positive cash flow. The first and most important tip for managing your small business cash flow more effectively is to keep a positive cash balance. This means that you should always have more money coming in than going out. If your cash flow starts to become negative, it can be difficult to catch up and you may end up in debt. To avoid this, keep a close eye on your expenses and make sure that you are generating enough revenue to cover all of your costs.
- Have a contingency plan. It is also important to have a contingency plan in place in case your cash flow does become negative. This could involve taking out a loan or line of credit, downsizing your business, or cutting back on expenses. By having a plan in place, you will be better prepared to manage your cash flow if unexpected expenses arise.”
“You should always have more money coming in than going out. If your cash flow starts to become negative, it can be difficult to catch up and you may end up in debt.” ~ Linda Chavez
Connect with Linda Chavez on Twitter.
Jean Will, Co-Founder at NiaWigs Inc., says, “A revolving credit will help small enterprises to comply with the economy’s fluctuations from time to time. They do not have to worry about being short with funds because of this revolving credit. However, they should still be wise in managing their business cash flow.”
Jean has the following tips for managing cash flow effectively:
- Track your income and expenses. It is vital to know where your money goes. It will help you to know how much you should save for the next month and how you will allocate your funds.
- Do not put all your funds in the bank. Keeping your funds in banks will not help your money grow. Put it where the value will increase, such as investments.
“Do not put all your funds in the bank. Keeping your funds in banks will not help your money grow. Put it where the value will increase, such as investments.” ~ Jean Will
Caitlyn Parish, Entrepreneur and Chief Digital Officer at Cicinia, says, “Revolving credit is useful considering that business funding is essential for the success of the business. However, with improper use of the management of such an opportunity, it can indeed be a heavy curse to carry.”
“One tip I can give regarding cash flow management is to learn the basics of cash management,” says Caitlyn. “Handling business cash is tricky so a thorough understanding of what should be the best option to take is necessary for the entity to achieve financial relief. Since cash flow is vital to the success of the business, having a strong basis for decisions regarding this is important.”
“Learn the basics of cash management. Handling business cash is tricky so a thorough understanding of what should be the best option to take is necessary for the entity to achieve financial relief. Since cash flow is vital to the success of the business, having a strong basis for decisions regarding this is important.” ~ Caitlyn Parish
Connect with Caitlyn Parish through Facebook.
Jake Hill, CEO of DebtHammer, says, “With revolving credit, you want to make sure you’re staying in control and paying down any revolving balances. You’ll also want to consider paying off higher interest accounts first since these debts are costing you the most money. All payments should be made on time, so that you avoid late payments, and make sure that you’re paying more than the minimum amount due whenever possible.”
“All payments should be made on time, so that you avoid late payments, and make sure that you’re paying more than the minimum amount due whenever possible.” ~Jake Hill
Lily Wili, Founder and Designer at Ever Wallpaper, says, “The main advantage of revolving credit is its flexibility. It allows borrowers to access cash in an emergency and has no expiry date. It is ideal for business owners like me to deal with market fluctuation. You can borrow money within the credit limit, anytime, anywhere. However, this comes at a high cost when poorly managed. It affects your credit score if you cannot pay on time; failing to settle your dues can result in closing your credit line and prevents you from opening new ones. Managing cash flow is a requirement for every business owner. Mismanagement of finances can affect your business’s health and growth.”
“Revolving credit comes at a high cost when poorly managed. It affects your credit score if you cannot pay on time; failing to settle your dues can result in closing your credit line and prevents you from opening new ones.” ~ Lily Willi
Lily has the following tips for managing business cashflow:
- Automate. Financial experts cannot stress this enough; switch to digital bookkeeping to keep your books and financial statements updated. Manual accounting leads to errors and inaccurate bookkeeping.
- Get paid on time. Train your clients to pay on time by sending invoices promptly and offering diverse payment options. Create payment plans, or provide discounts to encourage clients to pay on time.”
Connect with Lily Wili on LinkedIn.
Amanda Royle, Co-founder & Personnel Supervisor at Imgkits says, “In my experience, considering a credit line in my business is an opportunity to maintain a balanced cash flow cycle. It serves as a bridge between payables and receivables and covers seasonal and unexpected expenses.” Amanda advises that, “Paying bills appropriately and strategically could help manage business cash flow more effectively. Do not pay all your bills all at once; it could lead to cash drainage and scar your relationship with your supplier if you cannot pay. Review all your bills and sort according to priority; however, make sure to pay on time to avoid late charges.”
“Review all your bills and sort according to priority; however, make sure to pay on time to avoid late charges.” ~Amanda Royle
Brian Zapf, CPA, Founder & CEO of Flight Financial says, “Revolving credit is a powerful tool in a small business founder’s tool kit if used correctly. It can also kill your business if you don’t know how to manage it.”
Connect with Brian Zapf on LinkedIn.
Shaun Martin, Owner and CEO of Denver Real Estate Solutions says, “Before you take out a revolving credit, make sure you understand the terms and conditions. This way, you can be sure that you are using the credit in a way that will benefit your business.”
Shaun has the following advice for business owners:
- Keep a close eye on your cash flow – The key to managing your cash flow effectively is to keep a close eye on it. Know where your money is coming from and going to. This will help you make better decisions about how to spend your money.
- Make a budget – Once you know where your money is coming from and going to, you can start to create a budget. This will help you make sure that you are not spending more money than you have coming in.
- Invest in accounting software – Investing in accounting software can help you keep track of your finances and make it easier to create a budget. This can be a helpful tool for managing your cash flow.
Dan Belcher, CEO of Mortgage Relief says “revolving credit is an unending curse because debts are bad for business. It entails greater risks and higher interest rates. Working on or improving accounts receivable is a key way to manage cash flow effectively. Also, to reduce cash outflow, try to renegotiate with reliable raw material suppliers.”
“Working on or improving accounts receivable is a key way to manage cash flow effectively.” ~ Dan Belcher
Connect with Dan Belcher on LinkedIn.
Tom Kelly, CTO of Life Part 2 says, “revolving credit can provide a much-needed cushion during tough times and help businesses maintain a healthy cash flow. However, if it’s not used wisely, a revolving credit line can also be a curse, leading to excessive borrowing and debt.” To use a revolving credit to your advantage, Tom advises, “Don’t overspend; keep track of your expenses and ensure you pay back what you borrow to avoid late fees or penalties; use the business line of credit as a safety net to protect against emergencies; and have a plan for how you will use your revolving credit.”
“Use the business line of credit as a safety net to protect against emergencies; and have a plan for how you will use your revolving credit.” ~ Tom Kelly
Brandon Wilkes, Marketing Manager of The Big Phone Store says, “Many people are prone to overspending on a revolving credit line due to the allure of having more money to spend than they can cover. A $25,000 limitation might have a big impact on a small business. It might make purchasing new equipment, materials, and other essentials for a business much easier. You may also be tempted to acquire more than you require. If you only consider the initial payments on a revolving credit line, you will appear to save money. However, you will end up paying a lot more in interest in the long run.”
“If we’re given too much liberty, we’ll be sloppy,” says Brandon. “This is exactly why the revolving credit arrangement allows it to happen. The borrower can control revolving loan repayments by selecting from a variety of repayment terms. The borrower would most likely continue to avoid repaying the loan without a well-defined, long-term payment plan. Because the borrower can’t see the large numbers piling on their credit card accounts, it’s quite easy to go into debt rapidly with bad credit compounded at an unexpectedly high rate.”
Connect with Brandon Wilkes on LinkedIn.
Jessica Chase, Loan and Finance Expert at Premier Title Loans says, “For me, revolving credit is a blessing. It allows me access to the approved maximum credit amount whenever I need it. As a business owner, this is very important for me because I never know when sudden, unexpected expenses might pop up. In such a scenario, I don’t need to go through an arduous approval process to get a critical injection of cash in case I suddenly need it.” Jessica’s advice for businesses is “to manage your credit policies carefully. If you offer credit to customers, stand firm on those policies. It will be very beneficial to send invoices promptly, verify they have been received and follow up on late payments. Moreover, make it an obligation to check credit score of all customers before extending credit.”
“Make it an obligation to check credit score of all customers before extending credit.” ~Jessica Chase
Oberon Copeland, Founder and CEO of Very Informed says that a revolving credit “provides peace of mind knowing that funds are available in case of an unexpected expense. It can also help to rebuild credit by making timely payments. However, when used carelessly, a revolving credit account can quickly become a financial burden. Missed payments can lead to late fees and higher interest rates, and the debt can quickly spiral out of control. As with any financial tool, it is important to use a revolving credit account wisely in order to avoid falling into debt.”
“A revolving credit provides peace of mind knowing that funds are available in case of an unexpected expense.”
“When used carelessly, a revolving credit account can quickly become a financial burden.” ~Oberon Copeland
Kurt Walker, CEO of Mill City Home Buyers says, “Depending on how the revolving credit is used, it can be a blessing or a curse.” Kurt advises to “Quickly Collect Receivables – Encourage quick payments in order to improve cash flows. Request deposits from your customers before taking orders. Moreover, offer discounts to wind up outdated inventory and provide online payment options to people.”
Check out Mill City Home Buyers on LinkedIn.
Alex Williams, Certified Financial Planner and CFO of FindThisBest LLC says, “Using a credit card or any other type of credit, you can use upto 100% of the amount extended. But, it does not mean you should go through with maxing out your credit line, which negatively impacts your credit score. Paying down balances is always a good idea. The central aspect is that you should not be adding more debt to your higher limit.”
Josephine Li, Founder and CEO of Cicinia says, “Managing cash flow is one of the biggest challenges every startup faces. One thing that can help support a small business’ cash flow is a revolving line of credit. Though this financing option also has its respective cons, as a founder, I believe this is a blessing because with a revolving line of credit, funds are readily available and you can use it as you need them. You will only have to pay interest for the amount you used, and it can also help you build your credit.”
Josephine’s advice to business owners is, “Aside from getting a revolving line of credit, some other ways will allow you to manage your cash flow more effectively. One tip I can share is to cut unnecessary costs. Stay on top of your expenses to help you identify where you can reduce spending. Also, make sure to improve inventory management. Avoid holding too much inventory to ensure your money will not be tied up unproductively.”
“Managing cash flow is one of the biggest challenges every startup faces.” ~ Josephine Li
Adam Garcia, CEO of The Stock Dork says, “We started a revolving line of credit in order to fund our scaling process. We’ve found it to be a blessing for us. Funds are readily available for us, so we can borrow them whenever the need arises….My best tip for small businesses to effectively manage their cash flows is to leverage technology to automate as many processes as they can. You should automate bill payments for the end of the month or automate the invoicing process. This will help you eliminate human errors, save time and resources and improve your cash flows.”
Connect with Adam Garcia on LinkedIn.
Michael Humphrey, Founder & CEO of Z Grills Australia says, “The main advantage of this arrangement is that it provides startups with much-needed flexibility; they can borrow money when needed and then repay the loan when they have the funds available. However, there is also the potential for misuse; if a startup consistently fails to repay its debts, it can damage its credit rating and make it difficult to secure future financing. As with any financial decision, startups should carefully consider the risks and rewards before taking out a revolving line of credit.”
“If a startup consistently fails to repay its debts, it can damage its credit rating and make it difficult to secure future financing.” ~ Michael Humphrey
Esther Strauss, co-founder of Step by Step Business says, “Revolving credit is a great tool for small businesses if they use it correctly. A line of credit should be used only to fund operations for short periods of time, such as seasonal slow times. Use of the credit line should be part of an overall strategic financial plan which should include a time frame to pay the credit line off until it’s needed again. Without using the credit line, small businesses can manage cash flow more effectively by having a rolling 13-week cash flow forecast so that they know how much cash they’ll have on hand at any given time. They can also speed up the collection of accounts receivable, and put measures in place to manage their inventory most effectively. Many businesses use a push strategy for the inventory but could improve cash flow drastically by having a pull strategy.”
“A line of credit should be used only to fund operations for short periods of time, such as seasonal slow times.” ~ Esther Strauss
Connect with Esther Strauss on LinkedIn.
Ronald Williams, serial entrepreneur and Founder of BestPeopleFinder says, “With no hesitation and with personal experience, I can quote that revolving credit is a curse. Though it feels like a blessing since it pulls you out of current crises, eventually it pushes you forward toward a bigger crisis such as bankruptcy if you don’t deal with it technically.
“In the current scenario, with a high inflation rate and an upcoming recession projection, many businesses are becoming super sensitive about maintaining their cash flows. I would suggest taking these actions to maintain a healthy cash flow.
- Tough conditions require tough decisions. Monitor your financial limits and hold tight on your spending to maintain a healthy cash flow because it will determine how your business will face an economic downturn.
- Establish an achievable target plan to reduce your costs, excess inventory, expenses, and taxation, permanently adjusting them to the projected reality of sales, profit, and cash, and monitor frequently.
- Renegotiate prices and conditions with suppliers and partners and with that, it is also essential to eliminate the vanities of directors, managers, and coordinators by taking the lead in managing changes.
- Eliminate obsolete assets, waste, and operational activities unrelated to a specific purpose, i.e., events, meetings, programs, and projects.”
“Though revolving credit feels like a blessing since it pulls you out of current crises, eventually it pushes you forward toward a bigger crisis such as bankruptcy if you don’t deal with it technically.” ~ Ronald Williams
Connect with Ronald Williams on LinkedIn.
Emma Gordon, Founder at USSalvageYards says “Getting a line of credit for your business could be either good or bad depending on your needs and circumstances but in general, I hate playing the role of the debtor. Credits are one way or another becoming full time slaves without even knowing that you are doing that. A line of credit may give you unchecked access to getting money for use but it may make you borrow more than you need or can afford to repay.
In order to manage business cash flow effectively, business owners should cut down on unnecessary spending and learn to Plan and monitor cash flow; watch and learn what might be going wrong and try to proffer solutions. Know which lever to push to bring more money and retain cash.”
“Credits are one way or another becoming full time slaves without even knowing that you are doing that.” ~ Emma Gordon
Tom Monson, Owner of Monson Lawn & Landscaping says, “Whether revolving credit is good or not for your business depends on the size and type of your business. For many small business owners like myself, there is not a lot of invested capital to work with in the beginning. If you need to repeatedly purchase small items that you may not have the cash lying around for, having revolving credit available for those purchases can be very helpful as long as you pay it off quickly. As a landscaper, I sometimes needed to purchase supplies to finish a job. Because of this, revolving credit helped me make those purchases and pay it off as soon as I received payment for my job.”
“As a landscaper, I sometimes needed to purchase supplies to finish a job. Because of this, revolving credit helped me make those purchases and pay it off as soon as I received payment for my job.” ~ Tom Monson
Preet Kaur, Finance Manager at Matajer Dubai says, “A revolving credit is a blessing to startups. With the growing number of great ideas that people have, they may not always have the means the launch their idea into fruition. However, with the help of revolving credit, it is possible to launch a startup and form it successfully. With a revolving credit, startups can request different amount ranges. This can help startups during the critical and formative years because they can borrow money repeatedly. This helps them get their finances intact, avoiding a high amount of debt. This also allows them to be more flexible with how they budget their money. It’s important that when managing a revolving credit, you pay more than the minimum to help you have a better credit score and be on top of your revolving credit. If you can manage your startup this way, revolving credits are more than a blessing.”
“It’s important that when managing a revolving credit, you pay more than the minimum to help you have a better credit score and be on top of your revolving credit.” ~ Preet Kaur
Eyal Pasternak, licensed Realtor and Founder of Liberty House Buying Group says, “Revolving credit proved to be really helpful for my business, as we were able to finance many of our projects by taking out a line of credit. It can be a bit more expensive than using your own finances, as we had to pay an interest rate on the amount we borrowed from our bank. But it enabled us to expand our business, which was not possible without borrowing revolving credit.”
“The following tips can help in effectively managing the cash flow of a small business,” says Eyal.
- Firstly, you should frequently make future forecasts of your cash flow. This would help you to keep your business out of financial difficulties. You would have to prepare cash flow projections, which should be accurate. You would have to keep in mind past sales and expense figures, to forecast monthly cash inflows and outflows..
- Small businesses should also invoice quickly and avoid any delays. As delays can add to your time for receiving payments from your clients, which can lead to ineffective cashflows.
Harriet Chan, Co-founder and Marketing Director of CocoFinder says, “If used wisely, a revolving credit can be an invaluable tool for a startup. It can help the business expand its operations, hire new personnel, and launch new products or services. However, if not managed carefully, it can lead to cash flow problems and increased debt levels. To make sure that your startup uses its revolving credit wisely, be sure to create a budget and stick to it. Make sure you have a plan for how you will use the funds and be sure to make all payments on time. By doing so, you can ensure that your startup stays on track and avoids any financial pitfalls.”
“A revolving credit can be an invaluable tool for a startup. It can help the business expand its operations, hire new personnel, and launch new products or services.” ~ Harriet Chan
Patti Naiser, Finance Professional and the Owner of Senior Home Transitions says, “A revolving credit sets a maximum limit you can spend on the said account. My experience with such a card has been a blessing rather than a curse. When I was faced with increased debt somewhere last year, through this card, I was able to curb my spending habits. It also allows me to pay less interest than the traditional credit card option. The effective tip that I have for managing small business cash flow would be to keep a close eye on where the money is being spent. It would be best if you used automated tools such as Float, which helps gather information automatically. Business owners would no longer need to manually enter data. When you keep a close check on cash flow, it would help you identify any issues and make adjustments accordingly.”
Ellie Walters, CEO of FindPeopleFaster says, “Revolving credit is like the two sides of a coin, depending on the side you’re on it can be a blessing or a curse. Although it comes in handy when the business is going through some cash flow problems, like paying off utility bills and paying employees, without caution it can backfire. Apart from the temptation of spending over budget because of your access to money, the interest rate, especially when compared to taking a loan, is a lot.”
To manage a small business’s cash flow more effectively, Ellie recommends:
- Avoid anything that can cause delays in receiving payments from customers, especially problems related to invoicing.
- Problems with accounting should be immediately sorted out. Having an up to date financial information gives a clear understanding of the financial health of the business and what can be done to salvage the situation.
In summary, a revolving credit and other debt financing options can offer hope for a new business startup and provide much needed funding for business growth**. When done right and with an organized plan, a revolving credit can open doors otherwise closed. If the funds are mismanaged or the business owner becomes sidelined due to availability of large amounts of money, they can put the business into financial risk that they may not be able to recover from.
A word of caution about predatory lenders whose aim is to trap borrowers into unfair loan arrangements. The US Small Business Administration (SBA) website advises, “Protect yourself from predatory lenders by looking for warning signs. Some lenders impose unfair and abusive terms on borrowers through deception and coercion. Watch out for interest rates that are significantly higher than competitors’ rates, or fees that are more than five percent of the loan value. Make sure the lender discloses the annual percentage rate and full payment schedule. A lender should never ask you to lie on paperwork or leave signature boxes blank. Don’t get pressured into taking a loan. Survey competing offers and consider speaking with a financial planner, accountant, or attorney before signing for your next loan.” https://www.sba.gov/funding-programs/loans
For these reasons, use credible financial institutions to obtain loans and speak to your accountant, lawyer, or local business council for advice.
“Protect yourself from predatory lenders by looking for warning signs. Some lenders impose unfair and abusive terms on borrowers through deception and coercion.” ~ SBA
**Note: Radeya Global is a Muslim business organization. In Islam, interest is strictly forbidden. For these reasons, this article assumes all loans and business credit lines are interest free. Radeya Global does not condone loans with interest.
Written by Kokab Rahman
One of top HR services and top consulting companies in Turkiye, Radeya Global is the go-to expert for premium business solutions, HR solutions and content creation / PR & Media Relations services globally. Email firstname.lastname@example.org to learn how we can help you achieve exemplary performance for your business.