Should I take out a business line of credit for a technology purchase?

Running a small business or startup successfully often depends on recognizing the difference between investments you can’t afford to make and investments you can’t afford to ignore.

In periods of economic uncertainty — like the one we are living through in 2021 — small businesses need to be particularly mindful in managing their cash flow to cover short-term needs, including everything from purchasing inventory to processing payroll. It doesn’t take long for much of your working capital to be allocated, leaving little room for additional outlays that could be critical to fueling your business’s growth. In fact, a study by Intuit found that U.S. small business owners are losing $43,394 annually by foregoing a project or sales due to insufficient cash flow. It may seem safe to postpone purchases like technology, but these tools could become more critical than you anticipate.

The more customers you serve, for instance, the more that manual processes become too time-consuming. When your team can’t work remotely, it’s harder for them to collaborate and get the job done. And it’s difficult for your business to compete when you aren’t able to effectively sell, market and support customers with digital tools.

This is where a business line of credit or small business loan can make all the difference. These financing options provide growing companies the flexibility they need to invest in technologies that can move the needle on their critical metrics, like customer acquisition cost, customer satisfaction and even employee retention.

If you haven’t explored these kinds of financial solutions before, here’s an overview of how they work, and an example of how you could get started:

What is a business line of credit?

A business line of credit is a revolving loan that gives access to a fixed amount of capital, which could allow a small business or startup to purchase employee smartphones and tablets, repair existing equipment or even fill a gap in your cash flow.

Somewhat like a credit card, funds drawn from a business line of credit are subject to interest if you don’t pay by the due date. Interest accumulates until you pay off the balance.

Whether you qualify for a business line of credit will depend on whether the credit is secured. With a secured line of credit, you’ll pledge specific assets as collateral. An unsecured business line of credit doesn’t require that, but lenders may ask for a personal guarantee and a general lien — a form of security interest — on some kind of asset.

Of course, lenders also evaluate small businesses’ applications for a line of credit based on myriad factors such as how long the business has been running, its existing credit scores and the risk factors associated with the business’s industry.

How is it different from a small business loan?

Unlike a business line of credit, small business loans offer immediate disbursement of a lump sum, which has to be repaid according to an agreed-upon schedule.

Small business loans may be used for more specific purchases or investments than what you might pay for with a business line of credit. Once your small business loan is paid to term, you’d need to apply for another one to access additional funds.

The decision to approve an application for a small business loan is based on the applicant’s credit profile at the moment of submission. For a business line of credit, on the other hand, your provider may need to assess the longer-term viability of your business, given that your business could continue to use the credit for years to come.

How to choose a line of credit for a technology purchase

Regardless of which option you choose, small business financing requires having a solid grasp of your existing spending, your future needs and what kind of revenue you’re expecting to generate.

Before you apply for either a line of credit or a loan, make sure you’ve already developed good habits in terms of on-time bill payments and cash flow management.

Also, make sure you’ve thoroughly defined, in detail, the value of the technology investments you want to make. If you’re thinking about purchasing technology for your business, you should understand the technology’s total cost of ownership (TCO) and establish how you’ll measure your return on investment (ROI).

How Samsung Business Financing can power up your business

Samsung recently introduced Samsung Business Financing as part of its offering to give small businesses and startups more control over upgrading their teams’ technology, so you can grow your business faster and more easily.

By setting up a Samsung Business Financing account, you can apply for a no-fee business line of credit. You can apply directly through Samsung.com, either before you begin shopping or during the checkout stage. Approvals can happen in as little as 30 seconds.

If you’re approved, you’ll receive invoices that can be paid in 30 or 60 days. And with simpler cash flow management, you can authorize certain people on your team to make purchases with your line of credit. You can even include multiple buyers on a single account.

Hosted by TreviPay, Samsung Business Financing accounts are managed through an online portal, where you can check your available credit, view your invoices, pay your current balance or route your invoices and alerts to accounts payable.

Whichever direction you choose to go, exploring your financing options is an important first step toward powering your business for long-term growth.

With instant approvals, net terms and no expanding fees, Samsung Business Financing is an easier way to pay and achieve your business goals. And if you’re looking for new business phones, you can find the device that best suits your needs with Samsung’s quick, free assessment.