How Revolving Credit can help your business
February 7, 2019
A revolving line of credit is a great way to ensure your business has the cash it needs to operate. Every small and medium-sized business owner knows how hard it is to stay on top of fluctuations in cash flow and operating expenses. It’s not easy to ensure that you always have the cash you need to buy stock, pay salaries, settle bills and handle unexpected expenses.
A revolving credit facility is a flexible way to ensure there are funds available to your business when you need them.
What is revolving credit?
Revolving credit is a line of credit extended by a bank or other financial institution. The customer can borrow money as needed, up to a certain limit. It’s a flexible way to access money, without having to take a large lump sum of finance. It’s a useful tool for managing cash flow within your business as you can borrow as you need it, and then pay it back as money comes in to the business. The best part of revolving credit is that you can continue to reuse it over and over again provided you make your repayments on time.
How does revolving credit work?
A business applies for a revolving credit loan or facility from a bank or financial institution. They normally have to pay a fee to open the facility as well as an ongoing account fee to keep the facility open regardless of whether they actually use it. Once approved, the business can borrow as much money as they need up to the revolving credit facility limit. Unlike traditional loans that have a fixed repayment period and a fixed payment amount each month, a revolving facility is open indefinitely, and you choose how much to borrow and how much to repay monthly.
How can a business benefit from a revolving credit facility?
Revolving credit offers a business owner continuous access to funds that can be accessed at any time. This rolling facility gives you the flexibility to control exactly how much you borrow and when, and it removes the need to go through a whole application process every time you want to borrow funds.
What are the disadvantages of revolving credit?
Some of the disadvantages of a revolving credit facility are:
- Unnecessary fees
- Facility limits
- Surety and collateral requirements
Unnecessary fees. Normally, to take out a revolving line of credit you will need to pay an upfront fee. This is a fee over and above the interest charged on what you borrow. Additionally, you will have to pay an account fee each month, regardless of whether you actually used the facility that month.
Facility limits. Revolving credit loans are sometimes too small to satisfy the cashflow needs of a growing business.
Surety and collateral requirements. A revolving credit plan can also put you at risk. Depending on the terms of the line of credit, you may have to sign surety against your revolving credit loan in your personal capacity, meaning you may be liable to pay back the money should your business fail. You might also be required to put up assets as collateral. This can be difficult for businesses that are light on assets.
Bridgement Revolving Credit Facility
A Bridgement Credit Facility offers the same advantages as traditional revolving credit facilities, allowing you to access funds when you need them. The difference is that with Bridgement you only pay a fee when you withdraw funds from your credit facility. There are no fees to apply or open your Bridgement credit facility, and there are also no monthly account fees. Bridgement offers lines of credit up to 1 million Rand.
Apply for finance when you need it and receive your money within hours. You can use your Bridgement Line of Credit to withdraw funds whenever your cash flow is under pressure or when you’re looking to grow your business. You can pay back your finance at any time – without incurring any penalties. In fact, Bridgement even rewards you with an early settlement discount when you repay early.
Use your Bridgement facility for revolving credit
Once your Bridgement facility is up and running, it’s incredibly easy to return again and again to withdraw more funds whenever you need it. Simply go to your Bridgement dashboard online and within a few clicks, funds will be sent to your bank account. The quick and painless process will provide you with the finance you need to solve your cashflow issues or give you the funds you need to take advantage of new growth opportunities.
How to apply for a Bridgement Revolving Credit Facility
It’s so quick and easy to apply, taking 2 minutes to complete an application. Simply sign up to Bridgement and link your accounting package such as Sage or Xero. There are no complex forms to fill out, and no mountain of supporting paperwork needed. Our smart technology will take a look at your business situation and within a few hours, it will tell you the size of the credit facility your business qualifies for. Once approved, simply request funds from your facility on your Bridgement dashboard online and funds will be sent your way immediately.
Bridgement offers finance of between R10 000 and 1 million Rand, based on your business’s financial situation.
Try our 2-minute application process If you need a line of credit, give our 2-minute application process a try. There’s no fee to apply, and once you’ve been approved, you are under no obligation to take any finance. For a quick solution to your financing needs, apply with Bridgement today.
Find out more about our business financing services here, to choose the right option for your business.