Handling of cash flow is an integral part in any business. In fact, according to recent reports, more than 80 percent of small and medium-sized businesses fail because of mishandling of cash flow.
This is why it is important to have a business line of credit.
A business line of credit is a type of revolving loan. Business owners can have access to a specific of fixed amount of cash as a loan. In a way, it is similar to a business credit card. However, the business owner is charged an interest rate only for the amount used. It is perfect for when you have short-term financial needs or goals — and when you know you have money coming in, allowing you to pay for the loan you just took.
In short, it will allow you to deal with the highs and lows of your business.
But knowing how to spend business line of credit is an important part of this process. This type of loan, after all, is still pretty much that — a loan. You still need to manage the money carefully, in order for it to benefit your business.
Here are some ways and tips on how to spend business line of credit:
1. To deal with business fluctuations
There are seasons when your business may face low cash flow. Maybe your clients were slow to pay their bills and accounts receivables? Or maybe you just paid for a huge purchase for your business, and you are running short on cash? Having a business line of credit can help you cover expenses you can normally afford if not for the lower cash flow. This is especially useful since if you know you have money coming in your business.
2. Expansion or equipment
Business line of credit is also a good option for business owners who are looking into expanding their physical stores or buying new equipment for their business — in short, investments that would improve the operation’s revenue and cash flow. Using a business line of credit for this means you wouldn’t have to touch your cash reserves, which should be used for paying off operational expenses like utility bills and payroll.
3. Marketing campaign
It’s best to use a business line of credit for expenses and investments that would help the make the business more profitable. A marketing campaign would definitely boost your revenues if done correctly — it could expand your market and client base and increase your presence online or offline (or both).
Is there a client would who wants to hire your services for a project that’s bigger — and costlier — than what your business is used to? Taking a business line of credit can help take on bigger opportunities for your operations, hence opening up possible lines of revenue for your business as well.
There is really no single way how to spend business line of credit. However, it’s still important to manage it properly, making sure the reason for you to take the loan is clear and that it would, in one or way another, help you grow your business even further.
How to spend business line of credit is probably the most important question you need to answer once approved for a loan. Check out wise-spending tips at businesslineof.credit. Also, read this article about credit lines and credit utilization: http://www.business.unr.edu/faculty/liuc/files/BADM745/Liu_JMCB2006.pdf.
You’re approved for a line of credit now the question is how to spend business line of credit? We teach you the ins and outs so you can make informed decisions. Visit businesslineof.credit today.