The fashion world is always moving. What is popular today may not be popular tomorrow. This moving target of supply makes running a business in clothing and fashion tougher than a business that is much more relaxed on product availability. From your business needing to purchase clothes and other items, to your vendors needing to purchase materials and even your customers wanting to stay on the cutting edge of the “in” fashions- a line of credit may be a life saver. What is a line of credit though and how can it benefit you, your business and partners and even your customers?
A line of credit is a predefined amount of money that the bank is willing to lend you in a rather short period of time. Lines of credit are applied for before you need them, this cuts down the waiting time to access the money in an emergency. Emergencies for a fashion business could be needing to replace stock that has sold out via credit card purchases (which can take days to months to appear in your bank account). For vendors a line of credit worthy emergency could be an order larger than they are capable of fulfilling through normal operations. Customers, the life of any business especially a fashion store, could be faced with a cash crunch at the moment but really want that latest fashion designers piece of clothing before others are wearing it. A line of credit can fix all of these problems and many more as long as it is used responsibly.
Lines of credit benefit businesses such as stores and vendors making the product that will need money often. In cases where the money is quickly turned around, say every couple of months, it would be a waste of time to visit a bank for a traditional loan. When the money would be paid back rather quickly, it is in the best interest of the bank to save time and money on paperwork from issuing a new loan every month or two to the same customer. This also saves you, the store owner or vendor, time and money in not having to continuously fill out that paperwork and wait for an approval. A line of credit eliminates all of that and gets you back to your store with the latest product or in your design shop making that latest fashion piece.
There are other reasons to get a line of credit for your business. Banks don’t like to underwrite loans for certain things, or that often. Purchases that require a traditional loan include starting your business or buying a bigger location to operate within- those would be “mortgage” type loans. Banks like those since they are not often sought out by consumers and business owners more than a couple of times in a lifetime. As a business owner you would not apply for a traditional loan to make a onetime purchase of additional stock for your store or to make payroll that week.
Lines of credit are similar to credit cards, though usually with lower interest rates and more personable service at the bank. You are made aware of your “credit limit” and must stay within that via your purchases and payments on the balance. When running a fashion store you have to endure changing styles and needs of your customer. This also applies to vendors making the latest fashion wear.
For customers a line of credit helps stay in fashion with the current hot trends. There are not a lot of people that can afford to simply pay out of pocket for 100% of the cost for a new wardrobe every season. For most of us, a line of credit is much easier to deal with each month than a credit card payment (especially with all of the rules associated with credit cards today).
The benefits of a line of credit include protection against costs that are not known beforehand and are too small to warrant a traditional loan. With a little bit of planning on your part, a line of credit can be a lifesaver that keeps your business running. For customers, a line of credit could not only help keep them in the latest fashions but also possibly help keep their favorite shops in business for the next season of fashion wear.