7 Beneficial 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. A small business line of credit could help you grow your company and increase your cash flow.

Securing a small business line of credit is one way for your 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?

Whether secured or unsecured, a line of credit gives businesses access to money that may be used to handle any expenses that come up. 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’s needs.

Let’s take a look at some useful and unique ways that a small business line of credit could come 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.

There are a few things to look into before using your line of credit to launch a new marketing campaign. Things such as, calculating the cost of the campaign, who are you targeting, and how will the new customers improve revenue?

2. Get New Supplies and Inventory 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 your supplies. You can pay down your line of credit 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 by Using a Small Business Line of Credit

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 calculate your expenses and make sure that the amount borrowed does not exceed the expected profit. If you turn a profit after your expenses, then it means that using your small business line of credit was a good idea.

If you don’t think you will make a profit by using a small business line of credit, then another type of business loan may be better suited for your needs.

5. Increase Your Credit Score

If you want to improve your credit score, you can ask your lender to share your loan information with a credit reporting bureau.

This way, your business’s credit report will contain your line of credit information such as the amount owed and how you’ve been making your payments. If you keep up with making timely loan payments, this will help to improve your credit score

6. Use a Small Business Line of Credit to Expand Your Business’s 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 your business’s location.

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

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 you for whatever goods or services you provided them with. A line of credit can go a long way when this happens.

You can use it for the day-to-day operations of your business, utility bills, rent, or even for payroll and taxes. Once your customers pay you what is due, you can use that to pay down your line of credit.

A Small Business Line of Credit is More Than a Convenience

Getting a small business line of credit could be exactly what you need. It’s more than just a convenience. It can be used to expand your location, restock inventory, and take advantage of new business opportunities. More importantly, it’s great for helping the business grow and ensuring its operating during times of low cash flow.

You can also use it to get expert advice, train staff, and to launch a new marketing campaign. If you keep up with your loan payments, you could potentially have the chance to increase your business’s credit score. A better credit score can help you secure a higher line of 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 business’s needs.

If you would like to find more loan options for your business, then you can easily apply now.