Business Line of Credit

Being in business for yourself often feels like a roller coaster. Predicting the ups and downs is not always easy because of the speed in which things change. One tool that can help business owners enjoy the ride is a Small Business Line of Credit. This tool bridges the much needed cash gap when business is slow. The line of credit provides business owners peace of mind because bills can be paid even though cash has not been collected.

In many cases business owners are at the mercy of cash flow. Cash flow has various cycles depending on the specific business and industry. It is important for business owners to understand their cash cycle. This measures the time money leaves your pocket to purchase product and ends when you get that money back from the customer who purchases it from you. The length of time is important in determining what limit you need for your business line of credit.

Lenders expect your line of credit to revolve. This means the balance needs to go up and down. At least once a year you should have a $0 balance on your credit line. This tells the lender that your business is performing well. If you are not able to revolve the line of credit special care should be taken to understand why. A non-revolving line of credit is a red flag to lenders.

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