Flexible Payments 101: Revolving Credit vs. Installment Credit | Behalf
There is a major push in the lending industry for increased customer control. Lenders are brainstorming ways they can make their flexible payment products more convenient, engaging, and tailored to their customers. In the business sector, lenders are focusing their efforts on using technology to build innovative business lending experiences. The demand is higher than ever for small businesses to get the funding they need. Many banks fail to rise to the occasion because of their high rejection rates and slow approval processes. However, the alternative lending industry is spearheading the effort to empower small businesses with the funding they need to realize their potential and grow the economy.
Alternative lenders use the latest developments in technology and big data to build flexible payment tools for B2B transactions. Flexible payments give business customers more control over how they pay their vendors. Lenders have made great strides towards changing the lending industry to not only make flexible payments a reality, but also a given. Among the flexible payment options out, there are installment credits and revolving credit. At first, they might seem similar, but if you are a small business owner looking for ways to finance your business and increase its working capital you will want to know the difference. This article explains how installment credit and revolving credit work differently to give you more control over the way your small business transacts.
What is revolving credit and how does it work?
Revolving credit takes flexible payments to new heights. It is a credit account that allows borrowers to determine what, where and how they buy. Revolving credit accounts have a pre-set borrowing limit. Rates and fees vary, but their distinctive feature is once the funds are repaid they restore and are ready to be used again. For example, lines of credit and credit cards regenerate as a borrower repays them. From a business perspective, revolving credit benefits businesses looking to reinforce their capital reserve and boost their cash flow. They can use the funds for ongoing operational expenses and large business purchases. They can match their flexible payments to their business cycle, ensuring payments don’t fall on days when their business dips in revenue.
What is installment credit and how does it work?
Though not as flexible, installment credit is a flexible payment option for businesses with specific investments in mind. It is a specific amount of credit borrowed for a set time. The funds are gradually paid off on a flexible payment schedule, until the amount is fully paid. Unlike revolving credit, installment credit does not restore once it is used. You must apply for an entirely new loan. Within the application, the borrower’s reason for credit must be stated. Interest rates vary on installment credit.
For many small businesses owners shopping for business credit, the more flexible the payments the better. In which case, opt for a revolving credit line. There are many options out there, for better or worse. To make things a bit easier, consider a Behalf business purchasing credit line. Its term flexibility is unprecedented, giving business customers the option to pay right away or customize a flexible schedule that extends payment up to six months. A Behalf credit line can increase your business purchasing power in minutes. Flexible payments often come at a price, but a Behalf credit line has an affordable advance fee of just 1-3% per month with no hidden fees. Behalf believes in empowering small businesses, including yours.