For small businesses, access to capital is one of the most common obstacles to growth. You’ve probably heard the adage, “you need to spend money to make money.” While that’s not always the case, the small business landscape has become increasingly competitive, often giving those with money to spend on marketing and other expenses the upper hand.
Working capital can be a challenge for small businesses and real estate agents alike, particularly those that are subject to seasonal fluctuations. In response, businesses can either try operating on a shoestring budget or taking out a loan. Unfortunately, these options might not be the best fit for a small business. Budget cuts can slow or stop growth, while loans take time to process and are usually inflexible. A better solution for small businesses is to open a line of credit, which provides fast, flexible capital.
How does a business line of credit work?
A business line of credit works similarly to a credit card. You have an approved dollar limit against which you can borrow money as needed. When you need capital, you can borrow up to the set amount. Then, you’ll repay only what you borrowed, plus interest charges and any additional fees, like an origination fee. Unlike a traditional loan, which is a single, lump sum payment, a line of credit lets you borrow however much you need and borrow multiple times without submitting a new application (as long as you stay within your preset limit).
Benefits of a line of credit for small businesses
Though a business line of credit resembles a traditional business loan in some respects, a line of credit comes with some unique benefits.
Help manage cash flows
Small businesses have cash flow needs. They have bills, payroll, marketing and advertising costs, and countless other expenses. Real estate agents are no different. Expenses for real estate agents can include everything from business cards and professional photography to paid leads and transaction coordination. A line of credit can help real estate agents manage their cash flow needs throughout the year, especially during seasonal downturns when business is slower.
Faster, more flexible funding
A traditional business loan is useful for a predictable, planned expense. However, traditional loans may not be the best fit for a small business because they can take weeks to process and tend to be inflexible. With a traditional business loan, you’ll pay interest on the full amount, even if you don’t end up using it all. The lender may even dictate how you can use the funds. On the other hand, a business line of credit allows you to use the money for just about anything. You can also borrow as many times as you need, provided you make your payments and stay below your limit. Small businesses are more susceptible to fluctuations in capital and cash flow. When you need working capital on your terms, a line of credit is a faster, more flexible solution than a traditional one-time loan.
Covering emergency expenses
An emergency fund is essential for small businesses and real estate agents. A line of credit can serve as a stopgap for emergency or unexpected expenses. As a result, small businesses can enjoy peace of mind knowing they have the money to cover those expenses. For real estate agents, working purely on commission means it’s even more important to have a contingency plan. Whether it’s covering a personal emergency expense or ensuring you can pay yourself while you’re waiting for your next deal to close, a line of credit can help real estate agents handle an emergency expense.
By having access to a line of credit, small businesses and real estate agents can better manage cash flows and successfully navigate seasonality, down markets, and unexpected expenses that might arise. A line of credit can provide working capital for small businesses, allowing them to manage their finances more efficiently and plan for the future.
For real estate agents, Tongo can act like a line of credit. With Tongo, real estate agents have early access to their commissions, allowing them to pay themselves or cover expenses like continuing education, home staging, or getting more listings. Best of all, signing up with Tongo is free, it doesn’t impact your credit, and you won’t have to worry about any hidden fees.