Credit Lines: The Quickest Small Business Loans For Emergencies

Emergencies can strike without warning, no matter what business you might run. Without timely intervention, the fallout from such situations can severely impact operations. Given that funds are often required (and likely to be the primary obstacle) in mitigating these challenges, credit lines, by virtue of their loan structure, are one of the quickest small business loans for emergencies. This makes them compelling, more so for small businesses, whose revenues are often more volatile and closely tied to day-to-day operations

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What is a Business Line of Credit?

A line of credit is an easily accessible revolving loan that businesses may tap into at any time, subject to their credit limit. This process is called a drawdown and this amount will have to be repaid through instalments within the following months, according to the terms and conditions of the credit line. This repayment period usually lasts between three months to a year, but can be shorter or longer depending on the credit provider. 

Unlike regular term loans, the fees and interests incurred on a line of credit begins only after a draw down. Repayment of the principal and interest begins immediately in the following month. 

One other benefit is that you should apply for a line of credit when your business is looking at it's best. This allows you to get the highest limit approved so that you can draw on it when your business is in need. Getting an approval is without cost, remember you are only charged upon drawdown.

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How are Credit Lines Beneficial in Emergencies?

Lines of credit offer a flexible source of financing for businesses who are unable to ascertain, precisely, a specific time period of financial need or an amount. Businesses have more control on when and how much they want to borrow, taking into account their financial circumstances and repayment capabilities.

In short, they are not forced into a rigid set of loan terms and conditions, and can adapt the loan to their needs and repayment capabilities.

Another benefit of a term loan for businesses is that they are available immediately, making them ideal for companies who need quick access to funds. Here are other unexpected circumstances where a credit line can be of assistance. 

• Line of credit can aid businesses facing sudden cash flow problems, such as those resulting from outstanding invoices. It offers financing to cover operational and other production expenses to address immediate needs without waiting for loan approvals. 

• Emergency financing can also come in useful for a sudden surge in demand, either for services or products. A draw down can be used to hire additional manpower and buy equipment or raw materials to fulfill this demand. 

• Credit lines can also be used to address emergency damage to machinery, equipment and business premises, including warehouses, factories, retail outlets and more. The financing will be able to cover the repair or replacement of equipment, as well as the repair and renovations of company buildings. 

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What Are the Terms and Conditions of a Credit Line?

Financial institutions that provide credit lines often have their own set of terms and conditions, differing slightly from one another. Here are the common features of cash lines:

• Repayment tenors of up to 12 months for each drawdown. During this tenor, no prepayment penalties will be enforced. However, penalties will usually be levied once the repayment period has elapsed.

• Interests and administrative fees will only come into effect when you make a drawdown. If no drawdown is made, no payments are necessary.

• Approved credit limits up to 3X your monthly cash flow, with the condition that a drawdown is made within a year of approval. 

• Interest rates generally fall within the range of 1-3% per annum.

In Conclusion

To ensure that you get the best possible deal when it comes to credit lines, consider applying on Lendingpot. With a hassle-free sign-up using your Singpass business Myinfo credentials, you will be able to receive multiple offers for lines of credit financing from our more than 45 lending partners. 

Let our lenders compete and offer you the most favourable terms and conditions conducive to your short and long term success.. 

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