7 Ways to Use a Small Business Line of Credit

Posted at March 22, 2020 » By : » Categories : Business Funding »
small business line of credit

As a small business or start-up, having capital will determine whether you survive and grow. Your business must be able to cope with changes, especially during growth or a period of unsteady cash flow. Securing a business line of credit is one way for your small business to get access to the money needed for managing the daily cash flow and functioning of the business. It’s also a great way to make the most of new business opportunities.

Having a small business line of credit can be useful for your business’ growth and success. Read on to learn seven ways a line of credit can benefit your business.

What Is a Small Business Line of Credit?

Normally unsecured, this line of credit gives businesses access to money that may be used to handle any expenses that surface. No lump-sum disbursement is done at the opening of the account so there’s no need to make follow up payments monthly.

However, the line of credit is usually renewed annually and a credit review is also carried out. It’s sometimes compared to a revolving credit card.

As you withdraw funds, interest accumulates and the amount repaid is available again for you to borrow as you gradually pay your balance. It is the lender who limits the amount that you are able to borrow.

This type of credit is a revolving loan which you are able to use to fund your business expenses. It can be used for a wide range of expenses. With it, you are now able to repay it once you gain additional capital and then spend it again according to your business’ needs.

Let’s take a look at some useful and unique ways that a small business line of credit comes in handy.

1. Start a New Marketing Campaign

A line of credit is often used to start a new marketing campaign by businesses that are seeking to gain new clients, position their brand differently or boost their online presence.

When deciding if using your line of credit to launch a new marketing campaign is a good idea, assess the cost of the campaign, its target audience and how exactly the new clients are going to improve revenue.

2. Get New Stock for a Busy Period

If in your business, there’s a certain season that tends to bring in more revenue, it’s essential to stock up on inventory before the season becomes extremely busy.

Since the busy period normally follows a slow season where funds are usually tight, using a line of credit will help you to restock. You can repay it once your revenue increases.

3. Hire Expert Help

A line of credit can be used by you to gain access to expert advice and training. Some ways of putting this line of credit to use include hiring a sales consultant to draft a new script for your sales team. You can also use it to train them and to get your new sales program underway.

For example, if it’s a case where you decide that your business is in need of new software. You can hire a consultant to help with choosing, installing and operating the software. Money to do so can be taken from your line of credit.

4. Seize New Opportunities

In some instances, businesses use their line of credit to make the most of a new business opportunity. For example, to start a new contract they might use their small business line of credit to purchase the products or services needed.

The key, however, is to assess your expenditure and ensure that the amount borrowed matches up with the profit to be made and gained. If you profit after your expenses it means that using your line of credit was a good idea.

If you don’t stand to gain a profit then a loan may be better suited for your needs.

5. Build Your Credit Score

If you want to improve your credit score, you can try to find a lender who is going to share your loan information with a credit reporting bureau.

This way, your credit report will contain your line of credit in total, the amount owed and how you’ve been making your payments.

Once positive, this will help to improve your credit score

6. Enlarge Physical Location

Have you just completed a marketing campaign successfully?

If your marketing campaign launch was a success, you now have more customers than your business can accommodate. This means its time to expand.

When you use your line of credit for expanding your business’ physical location you have an opportunity to get the much needed extra space for your business to thrive. This makes it easier to pay off what was borrowed.

7. Take Care of Fluctuations in Cash Flow

Sometimes your business will have low cash flow due to how long your customers take to pay for their goods.

A line of credit can go a long way in these instances.

You can use it for the daily operation of your business, for utilities, a mortgage or even for payroll. Once your clients pay you can use that to repay your line of credit.

More Than a Convenience

Getting a small business line of credit could be exactly what you need. It’s more than just mere convenience.

It’s suitable for use to expand physically, restock inventory, capitalize on new business opportunities. More importantly, it’s great for tiding the business over and ensuring its operation during times of low cash.

You can also use it to get expert advice, train staff, and to launch a marketing campaign. Once you pay really well you even have the chance to get a higher credit score and secure even more credit.

The ways to use a line of business listed above give you ideas on how to make your business successful. However, you may be able to come up with other things you can use your line of credit for based on your needs.

If you would like to find borrowing options for your business, contact us now.