Most businesses go through a stage where they need additional cash to meet short-term expenses. Business lines of credit are a flexible source of cash. Here are some ways you can use this common type of funding to improve your financial strategy.

Access Short-Term Cash

There is a two-fold advantage in opening a credit line. First, once you are approved, you do not need to take the cash immediately. It makes sense to apply during the peak of your business season, to show the lender your stability. Second, as you begin to make payments, that balance that you paid is returned to your available line. This gives you cyclical access to your funds.

Secure Opportunities

Many businesses use the loan to help them through seasonal sales declines. However, pay attention to opportunities to help you build your business. Many companies use this to fund strategic partnerships with other businesses. Some companies take advantage of quantity discounts provided by vendors. This allows them to lower the cost of goods and increase profits.

Build Credit Score

Lines of credit are a great method to improve your credit score. Because your payment is based on the amount you borrowed, your payments are more reasonable. In addition, having an open line of credit increases your credit score. This makes your company more attractive should you require a traditional loan.

Decrease Interest Rates

Shop around different lenders to obtain the lowest interest rate. Credit lines typically offer lower rates and fees than traditional loans.

Avoid Collateral

Depending on financial standing, a lender may grant you an unsecured line of credit. This means you do not provide collateral on the loan. Be aware that these come with more costly fees and higher interest rates. If you have not been in business for at least 2 years or have a low credit score, plan on providing some form of collateral on the credit line.

Apply for Funding

Applying for a credit line is similar to applying for a traditional loan. You and your business will undergo the typical underwriting process – credit history, financial standing and collateral. After you see the ease of using the credit line, you will appreciate the benefits it provides your company.

Making sound financial decisions is important for the long-term productivity of your business. Be sure to research all financing opportunities, including lines of credit, to help build your company’s profitability and growth strategy.