When speaking to a new client, one of the first questions I ask them is “Do they have a line of credit?” What is the purpose of this question? Let’s get into it.
We think it is important for most companies to have a line of credit for a couple of reasons:
1. You are growing!
Yes, success! But are you prepared to handle that growth? When you grow, there are many times that cash flow can suffer in the beginning stages of that growth to pay for extra payroll, new equipment, and any additional costs of that growth. A line of credit can help with those additional costs in the beginning stages of the growth.
2. Get through the hard times.
Not only is a line of credit good for growth, but it is good for those months where cash flow may be low. Most companies have good months and bad months. You do not want to worry about how you are going to pay your employees or pay your bills during those bad months. That keeps business owners up at night. Rather, it is good to have that line of credit in your back pocket for those months, and then you will be ready for reaping the benefits of those good months.
3. Better rates than a loan.
A line of credit normally has better rates than a term loan, and you only have to take out what you are going to use. There are fees that will be associated with the line of credit, but we think those fees are worth the expense in order to have good control over your cash flows.
If you think it is good for your business, go get a line of credit and you may just sleep better tonight. Need help finding the right bank to work with? We can help with that too!