When to Apply for a Business Line of Credit

If you are trying to find the right balance of financial instruments to manage your cash flow, it’s important to understand when lines of credit might be your best choice. Many entrepreneurs use asset financing to manage cash flow, and there are a lot of reasons to keep that option open. Credit lines don’t preclude using other strategies, and the best uses for each instrument are different. It’s a good idea to know when a credit line will be your most cost-effective choice.

The advantages your credit line brings are several. For starters, it’s typical to see grace periods before interest is charged on revolving credit lines, so you can use them for short-term payment extension without having to pay additional fees or interest. In addition to that, many offer incentive programs like reduced or even waived interest when you first open the account, so you can time your application for financing to a purchase that would find that deal advantageous. It’s just a matter of finding the right credit provider. Once you’ve located one with the terms you need, timing your application is the next step.

Lines of credit are also advantageous when you need to lay out a lot of money quickly without impacting the rest of your cash flow. They’re reusable, so as you pay them off, you can access that balance when you need it. That makes it possible to stock up on inventory and approach opportunities to increase sales with confidence. When paired with other forms of financing that are better suited to cash flow management, it gives you a clear way to get everyone paid while still taking advantage of surprise opportunities. The best part is that when you do see a rapid return on your investment, credit lines are easy to pay off and inexpensive to keep until the next time you need them.

The right time to apply for a line of credit is a little before you need it. That way, you’ll have access when you’re ready to make your purchase. Don’t give yourself too much lead time if you’re trying to take advantage of an incentive deal or grace period on the credit line, but don’t keep your business waiting on an approval either. That way, you can easily get the balance you need out of your credit portfolio, and your business will perform even better for it. Lines of credit are powerful tools when they are wielded for the right purpose, and they can really increase your access to short-term business opportunities.

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