The Best Business Line of Credit for South African SMEs
By J Ferrer|
October 3, 2023
Hey, we get it – alternative funding represents many opportunities for efficient and accessible financing solutions, which is great. But that’s just the thing – there are many of them. From invoice financing to bridging loans to securing a business line of credit, it can be tough to discern which option is best for your business.
It certainly doesn’t help that the benefits and limitations of each of these solutions can vary greatly from provider to provider. For all the research that’s required to understand your alternative financing options, you may as well enlist in an alternative economics degree.
Or you could read our resources. We’re a tad biased, we know, but Bridgement’s ethos is about taking the best bits out of existing funding solutions and simplifying everything else. So, you’re looking for a quick and easy article that clearly explains how a business line of credit could benefit your growing business? You got it. Our ability to translate complex financial information into plain English is second only to our ability to deliver finance with speed and simplicity.
So, without further ado, let’s get into it.
What is a business line of credit?
A business line of credit is a type of revolving facility that is best suited to fund unexpected growth opportunities, as opposed to a large project with fixed costs and a predictable timeline. Although a business line of credit is issued with an upper limit as a preapproved amount, there is no obligation to use the facility to its full value.
Unlike a traditional loan, where a lump sum is given to the borrower with the agreement that they will repay the loan in fixed amounts, a business line of credit allows the borrower only to withdraw what they need, when they need it. Furthermore, you only need to pay fees on the amount that was borrowed, not the full value of the facility.
This makes a business line of credit a great option for growing businesses that need immediate access to funding, but don’t want the pressure of having to commit to using (and repaying) the full amount. Once the borrowed amount is repaid, the borrower can access the funds again – that’s what makes it a revolving facility.
In this way, a business line of credit is a little like a Get Out of Jail Free card in Monopoly. Instead of being imprisoned and immobilised by long waiting times or loan commitments that might otherwise deter a business from pursuing unexpected growth opportunities, they can immediately access a business line of credit to capitalise on those opportunities and secure a prosperous future.
What are the benefits of a business line of credit?
There are many benefits to obtaining a business line of credit but, for the sake of your screen time limitations (just kidding), we’ve boiled it down to just four.
- Speedy access to finance
Generally, a business line of credit allows SMEs to draw down finance with very little notice. Because the facility is preapproved, SMEs are effectively empowered to access cash on demand. This is especially helpful for growing businesses that want to be prepared to navigate seasonal fluctuations and capitalise on unexpected growth opportunities as and when they arise.
Once you’ve been approved for your Bridgement business line of credit, simply choose an amount (up to your preapproved limit) that you would like to withdraw. Then, it’s a simple matter of accepting the fee and the repayment schedule and the funds will be sent your way immediately. You’ll never be caught on the back foot again.
SMEs can draw down finance with very little notice (a.k.a access cash on demand). This is especially helpful for growing businesses that need to take advantage of unexpected growth opportunities or navigate seasonal fluctuations.
- Build business credit sustainably
A less obvious advantage of using a business line of credit is that it empowers small businesses to build positive credit sustainably. Anyone who is invested in the long-term growth of a business understands how powerful it is to establish good credit as early as possible in a business’s life.
When borrowers make their payments on time, it can lead to better terms and more favourable rates with lenders – and it tracks well with credit reporting agencies, too. And, because SMEs effectively decide the amount of capital they are borrowing against a preapproved business line of credit, it’s a relatively low-risk way to accrue good credit.
- Maintain greater control over capital
Instead of receiving a lump sum that is to be repaid at a fixed rate as with a term loan, a business line of credit allows SMEs to draw down on an as-needed basis and pay fees only on the amount that was borrowed – not the full value of the facility.
One of the standout benefits of opening a business line of credit with Bridgement is that clients who don’t use their facility don’t pay for their facility, making it a relatively cost-effective and commitment-free way to access instantaneous financing.
Because Bridgement’s business line of credit is revolving, SMEs can access financing with more autonomy and control over the terms instead of committing to a fixed-term loan.
This allows for a more flexible application of the funding. In other words, you don’t need to know exactly what you’ll use the funding for right away – you can use it as you see fit. This degree of accommodation can help growing businesses manage cash flow more effectively and support long-term growth.
A business line of credit is best suited to businesses that want to be prepared for anything
By applying for Bridgement’s business line of credit, you’re putting your business in the best possible position to take advantage of growth opportunities. There’s no knowing when opportunity will come knocking, but it’s best to be prepared for when it does.
Empower your business with the ability to act quickly. Unlock access to up to R5 million in business funding with Bridgement. It takes two minutes to apply online. If you want speed and simplicity, then you want Bridgement.
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