Since Ryan started Catalyst for Business, we’ve talked a lot about strategy and growth, but not enough about how credit access can make or break a company. You need to understand that many businesses are one slow season away from serious trouble.
There are growing concerns among business owners about how to keep things running when cash runs low. It is becoming harder to find consistent funding with the recent economic uncertainty. Last year, Asset Finance Connect reported that 33% of SMEs needed financing just to survive the following year. Keep reading to learn more.
Getting Financing Will Be Even More Important if the Economy Stalls
You can see the pressure building with every new round of tariffs or inflation reports. There are more business owners watching interest rates rise and wondering how long they can hold on. Adam Zaki at CFO.com shared that companies are cutting profit forecasts by 22%, which is a sign that businesses are bracing for harder times ahead.
It is clear that the economy is making financing more complicated. You won’t find many lenders giving out favorable terms without strong credit or collateral. There are concerns that even businesses with a solid history are being turned away because lenders are more cautious now. You should expect higher standards and more scrutiny than in previous years.
You might be surprised to learn that 82% of business failures are caused by cash flow problems, according to a study by US Bank. It is not always a matter of bad ideas or poor leadership—many businesses just run out of breathing room.
There are ways to prepare before trouble hits, and a business line of credit is often one of the smartest tools available. You don’t always need to use it right away, but having it ready can keep operations going when invoices are late or sales slow down. You are more likely to survive rough quarters if you already have access to credit.
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It is tempting to focus only on daily operations and assume things will work out. You risk missing your chance to secure funding when conditions are more favorable. There are lenders who offer revolving lines of credit that can grow with your business, but applying in a downturn is often more difficult. You should act while you still have the leverage to negotiate good terms.
Whether you need to stock more inventory, hire additional workforce, or upgrade your assets, growth requires capital. One option is to use a Bluevine business line of credit to get the required capital.
So, when is the right time to use a line of credit to enable growth, and how can accessing one help your business?
Understanding the Power of a Business Line of Credit
A business line of credit offers a degree of freedom that lump sum loans can’t. It’s basically like having a credit card — you have access to money without borrowing the full value. This is often called a revolving line of credit, especially useful to businesses that experience seasonal fluctuations in cash flow or need to invest money incrementally.
Instead of applying for a lump sum and wondering the best way to use it, a line of credit can be put to use whenever you need cash. So, you can invest as needed to scale your business without needing to use everything.
When Should You Use a Business Line of Credit for Expansion?
Here are some of the things to look out for when deciding whether or not to use a business line of credit:
1. Expanding Product Offerings or Services
If your business has a loyal customer base and a successful track record, you may need to consider selling new product lines or services. A line of credit can give you the financing you need to work on and market new product or service lines without disrupting your current business plan. You can use the funds when you need them, and pay them back when you’ve completed the project.
2. Scaling Operations and Hiring Staff
Growing often means you have more openings that need new talent. While hiring may seem straightforward, there are other costs apart from the salary, such as recruiting costs, HR costs to onboard the new hire, etc. Before you grow your team, you should make sure you can afford these to ensure you grow profitably. By using a line of credit to cover payroll and recruiting costs, you can hire the right talent to sustain growth.
3. Expansion into New Markets
Expansion for many business owners usually means going into new markets. This can mean moving into a new region, opening an online store, or signing a lease on a new brick-and-mortar location. However, opening new markets often means new costs, but this is no problem when you have a Bluevine business line of credit. It helps business owners front the cash for expansion efforts.
4. Managing Seasonal Cash Flow Fluctuations
Negative cash flow is one of the most difficult parts of managing a business that operates mainly during a certain time of the year. The ebbs and flows of your business can make money tight when there is no more business to be done in your niche. A business line of credit can help you bridge the gap between successful seasonal sales periods and the end of the off-peak times. Simply tap into it to cover operational costs until your business begins to yield revenue again.
Make Your Expansion Plans a Reality
You know you are ready to grow. Now is the time to consider how you will finance your business expansion to bring your vision to life. With a business line of credit, expansion will be easy. Invest in yourself and your brand, practice thoughtful growth, and consider your strategy for growth. All you need is the right financing to see your brand take off.