3 Ways To Use a Business Line of Credit
Lines of credit can be invaluable assets for a small business. They typically offer flexibility and do not necessarily insist on the same stringent loan requirements that are necessary for a more substantial term loan. If you have a small business, it may be worth seeking out a business line of credit. Here are three ways you can use it at your workplace.
1. Cover Payroll
While payroll is often a regular expense, for a number of reasons, you may need to get creative covering costs at certain times of year. Sometimes this can simply be due to the regular ups and downs of business; you may be going through a slump, and rather than laying people off, lines of credit can be useful to help cover short-term expenses.
On the other hand, you may be experiencing a business boom, particularly during a seasonal period. In this case, using a credit line to cover payroll for additional workers can be a helpful short-term way to stay well-staffed, and can be repaid once the seasonal boom is over.
2. Fund an Emergency Repair
Over the course of business, you’re likely to deal with unexpected damages or disturbances. It could be as simple as a pipe bursting, or as substantial as the aftermath of a major natural disaster. In either case, quick access to cash is a must-have, and may even be necessary to keep your business afloat.
Lines of credit can be invaluable in such a situation. They will allow quick access to funds to make any emergency pairs, and help get your business back on the right track.
3. Purchase Needed Supplies, Inventory, or Other Materials
Sometimes the need for additional supplies or inventory may arise unexpectedly — for instance, after an unanticipated rush, or when inventory from one supplier runs out of stock and you’re forced to use an alternative supplier. Whatever the reason, a line of credit will help cover you in this type of situation.
Ultimately, the mechanism of a line of credit makes it an invaluable asset for your business. You’ll have flexibility to spend up to a certain limit. Once it’s reached, you’ll be unable to borrow — but as soon as you repay, the funding limit will recharge itself.
While a line of credit is not necessarily a good way of funding major purchases, it can be incredibly useful in the short-term. Consider the benefits above to determine whether a line of credit can help your business.