How to Use a Business Line of Credit
Business lines of credit, much like personal lines of credit, are a type of revolving credit which gives businesses access to fast cash up to a certain amount. Unlike conventional bank loans, these credit lines don’t come with designated use terms and can be replenished as they are repaid. They also give borrowers the flexibility to adjust payments as business allows so long as at least the interest is paid. Here are just some ways to use a business line of credit.
Increase Inventory
Keeping the balance between too much inventory and having enough on hand to fulfill orders can be tricky. Sometimes an unexpectedly large order may come through, leaving you scrambling to purchase the necessary inventory. Using your business credit line to purchase the necessary supplies can help you be able to meet unexpected large orders and be able to propel your business’s growth.
Cover Payroll
If you find yourself in need of more staff but lacking the immediate cash flow to cover the increase in payroll, a business line of credit can help in this situation. This may be paying for employing training or increasing staff ahead of an expected seasonal boom. Whatever the reason, tapping your credit resources can help you keep the help you need while your business catches up to payroll demand.
Making a Large Purchase
Business lines of credit can also be used to fund large purchases. Perhaps your business needs new computers or a large piece of equipment. Since credit lines offer quicker access to cash than loans, and an established credit line will not require any additional paperwork or collateral, using the credit to make an equipment purchase can be easier than trying to fund this purchase with a traditional loan from a bank.
Emergency Costs
Finally, there may come a time when you need to make a purchase or find working capital quickly. Once your credit line is established, your access to the available credit is near instantaneous, making it extremely helpful in emergency situations.
There are many reasons why a small business owner may need to access funds quickly. Whether they need to increase inventory to fulfill a large order, cover payroll, make a large business purchase or have unforeseen emergency costs, business lines of credit offer that fast access. With flexible terms and payment options, these credit lines can be an invaluable business financial tool.
