Running a business requires a large amount of continuous working capital to thrive and grow. Sales growth can come in spurts and expenses sometimes don’t line-up conveniently with revenues. So, what happens when cash is needed? Lines of credit are an often-used (and excellent) solution.

What is a Line of Credit?

A business line of credit is a device that allows a borrower to use money as it is needed. A maximum borrowing amount and term are established with a lender upfront. Thereafter, any amount can be used when it is needed. Then, the borrowed amount is paid back with interest on that amount only. The loan amount is replenished to be used and repaid and used again in a repeating cycle.

The advantages of business lines of credit include:

• Working capital is available on-demand, even before your organization may need it. 

• Usage is flexible. The business owner can decide how and when to use the money. 

• Payment terms are flexible. Interest is paid only on the amount used and payment can come in full or in part on the amount of funds accessed. 

• Lines of credit build a business’ credit score, helping a company obtain additional funding based on its credit worthiness.  

6 Business Growth Tips with Business Lines of Credit

Business lines of credit can be used in many ways including:

• Covering fluctuations in cash flow due to business cycle changes. 

• Covering fluctuations in working capital due to slow payment of accounts receivables. 

• Building up inventory. 

• Launching a new marketing campaign or strengthening marketing efforts. 

• Expanding a physical location or buying new equipment. 

• Seizing new opportunities.  

Three Key Things to do When Applying for Lines of Credit

• Know how much money is needed and for what purposes. 

• Carefully prepare a business plan and assemble all the necessary financial documents. 

• Don’t wait too long to apply.  

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