Whether you’re looking for funds to help you through cash flow issues, an emergency equipment repair or to expand your inventory during a period of growth, there are a number of short-term credit solutions available to small businesses. With short-term credit, you can take advantage of credit without committing to a long repayment period, so you can keep your business on stable ground without staying in debt for too long.
Let’s review a few different short-term credit options so that you can find the best solution for your needs.
A business credit card
You might not think of a credit card as a short-term credit solution, because you can use it as long as your account is open and in good standing. But if you want to avoid a long period of debt, a credit card can actually be a cost-effective option because you can pay it off as quickly as you want. A low-interest business credit card could help keep your interest costs down while you pay down your balance. And, if you’re able to pay off your statement balance in full at the end of the month, you could avoid interest altogether.
With the CIBC bizline® card, you can pay low rates and no annual fee, which could save you money in the long run. You could also add multiple cardholders to streamline how you handle expenses as a business and use the CreditSmart® tracking tool to help manage your finances.
A business line of credit
Similar to a credit card, a line of credit is another type of revolving credit, meaning you can borrow up to a set limit, repay what you owe in part or full, and borrow again. The difference is that a line of credit is not open-ended, like a credit card is. You can use the money during what’s called the “draw” period, and then you repay it in full during the repayment period. Typically, the draw and repayment periods only last a few years.
A business line of credit could offer a higher borrowing amount with a lower interest rate than a credit card, especially if it’s secured. A secured line of credit requires collateral, or something valuable that your business owns, like a warehouse or equipment. If you can’t repay the money, the lender could take the collateral to recoup their losses.
A short-term business loan
With a short-term business loan, you’ll receive a lump sum of money upfront that you’ll need to repay in monthly installments over an agreed-upon period of time. Because the repayment period is structured and has a clear end date, a short-term loan may work better for business projects with a set timeline, such as renovating your store or launching a new product. As with a line of credit, a business loan could also be secured or unsecured.
Make sure you can manage the loan repayment period, which may be short, and meet the monthly payments, which are usually broken up into equal installments with interest.
Community or government loans
You could also research small business loans in your community or ask other business owners in your area how they’ve used short-term credit solutions to stabilize their businesses. Consider looking into Canadian government programs that help small businesses secure loans. For example, the Canada Small Business Financing Program helps small businesses by taking on some of the risk a lender would otherwise shoulder.
Find a credit solution that works for you
Do your research, figure out what kind of short-term credit solution will best serve your business needs and make the most of the funding you get. Whichever option you choose, make sure you have a plan to repay what you owe and use the money as you intended, and you might be able to build a more stable foundation for your business to grow.
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