How to Use Business Lines of Credit

When you’re looking for a flexible way to boost your cash flow or cover emergency expenses, you need a business line of credit. Lines of credit are a popular way for many small businesses and larger corporations to receive the financing they need. Learn how to use a line of credit and why you should consider applying for one today.

Similar to a credit card, a business line of credit offers ongoing credit that you can use whenever you need it. You won’t have to take the loan out immediately and start accruing interest like a business loan, but instead, you’ll have a safety net of financing available when you need it. Once you take out your line of credit, you’ll have a minimum monthly payment and set interest rate, much like a loan.

Applying for a line of credit typically requires a credit check and financial history. Upon approval, you’ll receive a credit limit. Some credit lines are secured with an asset, while others are available without security. Choose between a revolving and non-revolving option. Revolving lines of credit allow you to take out smaller loans when you need them and continue to take out additional funding until you’ve reached your maximum credit limit. A non-revolving line of credit only allows you to access credit once until you pay it back in full.

One of the biggest benefits of using a line of credit is flexibility. Many small-business owners choose to use their line of credit for emergency expenses. If you have a late invoice, broken machinery or looming deadlines for other financing, use your line of credit to balance your cash flow situation.

Another excellent way to use credit is to invest in business growth. Additional working capital can allow you to jumpstart your business and increase your profits. Invest in marketing, additional employees, inventory or the latest equipment to enjoy improved services and profits. A line of credit can be used for virtually any business expense, so you don’t have to be concerned with bank approval of each individual spending decision. Invest how you feel you need to and grow your business with your own unique business plan.

Check your credit score and determine whether you qualify for a line of credit. A lower credit score doesn’t necessarily disqualify you for lines of credit, but a strong score is needed to access more credit and receive the best interest rates and other terms.

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