| Business Line of Credit |
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1. Use a Business Line of Credit to Cushion Seasonal Sales Lows
Businesses with varying revenue streams need capital during slow periods to operate efficiently. A business line of credit can help entrepreneurs stay financially afloat until the excess funds from more lucrative months roll in. Predicting the degree of a seasonal downswing is difficult, making term loans an impractical business financing solution. Fortunately, with a business line of credit, borrowers only have to pay interest on the amount used.
2. Ease Your Payment Cycle Cash Crunch with a Business Line of Credit
Businesses with long accounts receivables often experience cash shortages that impede business growth and depress service standards. A business line of credit can solve these issues. For example in the IT staffing industry, companies need to spend a lot of time (sometimes up to 30 days) and money upfront to recruit, train and deploy personnel. Generally, companies do not receive payment for 90 to 120 days. The company is forced to cut costs, like training programs, affecting the overall service level. With a business line of credit backed by accounts receivables (also known as accounts receivables financing or accounts receivables factoring) lenders fund up to 90 percent of the receivables, depending on the creditworthiness of the business’s customer base.
3. Cost Savings Associated with a Business Line of Credit
Small business owners can use a business line of credit to take adavantage of discounts available through bulk purchases or cash advances. For example, wholesale distributors of wireless pre-paid phone cards need cash for buying minutes in bulk from telecom companies. Paying upfront can earn the distribution company a 3 to 5 percent discount on the cards. The need for working capital arises when retail customers pay the distributors over a period of 14 to 21 days. Using a business line of credit as working capital can directly improve a company's bottom-line. |