How to Avoid Misusing Your Business Line of Credit

Business Line of Credit

You might be running a business for which you are considering getting a business line of credit. This can be a great asset for you to have. It can be used to stabilize your month-to-month income with invoices coming in and out constantly. Many of your customers may be having their own difficulties keeping things running. “Net 30” agreements are not always paid off in 30, 60, or even 90 days. To protect against this possibility, a credit line can be very helpful. You could factor some of your invoices in a pinch by selling them to a third party for a fee. However, that’s typically more expensive. There are definitely ways in which you should not be using a business line of credit. We’ll discuss those ways, in today’s article.

If your company is not profitable, and you don’t have a clear plan to get it back on track, don’t draw from your business line of credit to deal with the problem. This is just kicking the problem down the road a bit, and it is not a solution. You should face the issue head on by making real changes to deal with it. If you can’t stay on track, try to bow out gracefully by selling to a larger, better-funded company. Remember, you can always start over, but it is harder if you destroy your credit in the process.

This principle applies to any sort of longer-term purchase, as well. Drawing from your business line of credit for emergencies or to stabilize your incoming and outgoing receipts is fine. However, if you have a major purchase on the horizon, such as an equipment purchase or office upgrade, put in the legwork to get a secured loan instead. This will save you thousands in interest, in the long run.

For more information, go to Business Line of Credit at

How to Avoid Misusing Your Business Line of Credit was last modified: October 14th, 2011 by Amit Kraidman
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