How to best use credit in business

When properly used, credit can be used to further nourish the growth of the business.

FNB has embarked on a campaign to educate business owners and change their perception about credit facilities. According to Sanjeev Orie, the Head of Business Acquisitions for FNB, many business owners have the wrong idea about credit – which might severely limit the growth and financial security of small to medium businesses. “When correctly used, credit is still a strong business ally, especially considering the cash flow benefits it can afford,” says Orie. FNB regularly scores its business clients for an overdraft facility, even though most qualify for the credit, around 20% take it up for business use.

4 points to considering when using credit for your business
Orie offers the following points to keep in mind when considering getting credit for your business:

1. Assess your need
Using the right credit facility is vital and with an understanding of your needs and advice from your bank, the right decision can be made that will not only benefit the way your business performs or grows, but will also align with what is affordable for you business to repay.

2. Correct documentation
Banks need to correctly gauge, asses and quantify the risk attached to a credit facility that they may offer a business. In this regard, well-documented and recorded financial statements, as well as business plan, will help you negotiate the best possible terms and rates.

3. Adhere to payment conditions
If you encounter problems with making the minimum payment for the credit facility, you have to bring this to the attention of your bank as soon as possible. It is in the best interests of your business as well as the bank that you ultimately pay what you owe, even if the terms of the agreement are changed.

4. Business loans
Business loans are more structured credit facilities and are ideal for larger expenses. These loans are for longer time frames, enjoy lower interest rates and can be tailored for your particular business needs. Businesses need to understand the different credit tools available to them, and then make use of them to benefit.