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Business lines of credit are a great tool for all business owners to have at their disposal. Every business owner at some time or another faces a cash flow crunch which can often tie their hands when they need immediate liquidity.

Lines of credit are typically used to fund short-term needs in times when cash is not coming in as quickly as it is being spent. While the business will traditionally make monthly interest payments on the amount borrowed, final repayment commonly comes from the business's conversion of short-term assets to sales through the normal course of business. Some of the most common uses for a business line of credit include:

1. Meeting Immediate Payroll Needs

When business income is not keeping up with the current demands placed on employees, you still have to meet your payroll needs. Having the ability to tap into your line of credit to meet an unexpected shortfall in cash is beneficial because it can help prevent a business owner from being unable to pay their employees.

2. Meeting Monthly Expenses During Annual Slow Periods

Nearly every business faces some sort of seasonal slowdown. During this time, your vendors are still seeking payment, rent payments, and utility bills continue to be received. By drawing down on your business line of credit, you will be able to remain in good standing with your vendors as well as not miss out on opportunities to take advantage of discounts which may be offered when paying your vendors earlier than the “full” due date.

3. Seizing Opportunities to Increase Inventory

Every company which distributes products knows that they can always do better maintaining their inventory in the event a large order is placed. Having the raw materials needed to produce the inventory is not always easy, especially if your accounts receivables are not being paid immediately. Using a business line of credit for inventory purposes is another common use for this type of reserve businesses should have.

Some business owners will also take advantage of one-time deals offered by vendors which may require a cash purchase. If a vendor is liquidating their inventory and the materials can be used to help boost their in-house inventory, a line of credit is the ideal financial tool.

4. Marketing Opportunities for Business Growth

Sometimes the best marketing ideas come at the worst possible time for your business. If your marketing team has come up with a brilliant idea meant to attract new customers, you want to have the cash on hand to enable them to implement their ideas. However, if this happens to coincide with a seasonal slowdown, or other times where your cash flow is not in line with your needs, then you can use your business line of credit to facilitate the plan.

5. Lines of Credit and Flexibility

One of the best reasons to have access to a line of credit is the flexibility which is offered. When you need cash immediately, your approved line of credit is available. If you do not need access to the cash, you simply leave it until it is needed. You do not owe a payment on a line of credit until such time as you take your first drawdown. Payments and interest are due only on the amount you have borrowed.

If your line of credit is revolving, this means that as you repay the principal, you have immediate access to that amount should the need arise.

Baker Boyer Helps Businesses Find the Right Financing Plans

Every business has different financial needs. The one need each business owner has in common is the need for cash on hand. When you work with your Business Advisor, you can find out what types of financing packages are best suited to meet all your financial needs. Setting up your financial plan early can help avoid unexpected cash flow shortages. Contact us today and let us help you design a plan that works for your business.