A business line of credit is a revolving credit that you can use to fund various business expenses. With a business line of credit, you can use the funding when working capital is low, pay off the line when you receive additional sales and then re-spend the funding as needed. Small businesses use these financing products for many business related expenses.
Here are the seven ways you can use a business line of credit.
- Restock For The Busy Season
In case you are in a business where the season has a serious influence on your sales flows, restocking inventory earlier than the busy season can be very hard, especially because the busy season normally comes right after the slow season when working capital tends to be tight. In these instances, you can use a line of credit that will help you restock.
As business lines of credit stay open until closed by means of the lender or borrower, you can use the same line of credit to restock before the busy season and then pay it back when your sales improve.
- Cover Fluctuations in Working Capital Due to Slow Repayment of Accounts Receivables
In other cases, rather than encountering the seasonal recedes in cash flow, companies encounter lower cash flow because their customers take too much time to pay their accounts receivables. In situations like this, business lines of credit also can help. The entrepreneur can use the line of credit to cover regular costs including payroll, mortgage payments and utility bills. Then, when the customers eventually pay their accounts receivables, the entrepreneur can pay down the line of credit in so that it’s equipped to fall back on again in the future.
- Leverage Expertise
Entrepreneurs also use lines of credit to access to the recommendation and training of professionals of their fields. For instance, if you’ve a sales team and you decide that they would be more successful with a new script and a new approach, you can decide to employ a sales consultant to help you draft the new script, teach your sales staff and put into effect this program. Further, if you decide that new program would speed up your businesses processes and lower charges, you can decide to use your business credit line to employ a software consultant to help you select, set up and use the software.
- Launch a New Marketing Campaign
Businesses who want to attract new customers, who want to recast their brand in the network or who need to boom their online presence, frequently use a business line of credit to launch a new marketing campaign. In case you are attempting to decide if a marketing campaign is a positive use of your line of credit, you need to have a look at how much the marketing campaign costs, who it’s going to get and how you expect those new customers to improve your revenues.
- Expand Physical Location
The ideal result of marketing campaign is to have more customers than your business can keep, and when that takes place, many entrepreneurs again turn to their line of credit. Using credit to expand your current location gives you more space to display new inventory, more space to add some seats in your restaurants or more space for whatever your business does. In case you are certain that the more space is what your business actually desires to attract more profits, expansions to your physical location can be an excellent way to apply a line of credit.
- Jump on New Opportunities
In other instances, businesses use lines of credit so that they can jump on new possibilities. For instance, imagine you just have been offered a contract with the potential to yield $50,000 in earnings. You would like to take the work, but you don’t have the appropriate tools. But, in case you spend $5,000 on new tools, you will be able to jump on the opportunity.
For situations like this, it is significant to sit down, observe your expenses and examine the amount you need to borrow to see how that compares to the potential for profit. In case you profit after the expenses, then, using a loan to jump on the opportunity is a tremendous way.
Entrepreneurs use their lines of credit in many different ways. Some use lines of credit to buy new hair dryers for their barbershops and others use credit to launch advertising campaigns or new shelves for stock displays. However the one constant is that smart borrowers use credit purposefully to grow their business.