A Smart Way to Finance Your Working Capital by Business Credit Line
Working capital is the blood of your business, how to get it financed in a smart way? In business once you have place to conduct your business, have equipment to produce your product, the next important things are buying main material for production, purchasing supporting material and paying your workers’ wages and salary.
It will need cash for a short term period, because once you sell the product the sales proceeds could be used to increase your cash balance again. But this short term need is necessary to be fulfilled BEFORE your revenue from sales collected. How to do it?
There are two smart ways to get your working capital financed. First is to get vendors credit lines. Ask them to allow you to make credit purchase. The disadvantage of this is you will be tied to certain supplier and lost the opportunity to purchase from other suppliers with a better price or more suitable product.
A more flexible way is the cash credit for working capital. This is called as business credit line. It is a credit given by your bank extending from your checking account. You can withdraw from your checking account more than your balance for short term need of cash and get it paid once your sales revenue is bank in.
You can be smarter with the flexible working capital credit by negotiating good rate from your bank. To be able to bargain, you need to have a good credit rating. You should notice that the credit rating is your company separated credit rating, because the business credit line is part of the corporate credit concepts: separation between personal credit and corporate credit.
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