Is Credit a Good Source of Cash for Your Business?
If used carefully credit can be a good source of cash. You can use a revolving credit line to pay for your needed inventory in June and July and start paying the credit line back down in August, September and October. The trick is you can’t start looking around for a credit source in July. If you’ve done your cash flow projections you’ll know what your requirements are in enough time to find the credit source you need, at the terms right for your business.
Credit, of course, can be used for emergencies such as repairing broken equipment. Or to pay a one time yearly expense and then spread the credit payments over the entire year.
It can also be used to help a company grow.
Introducing a new product almost always take longer than anticipated. Reaching a new target market requires patience, time and money. There can be delays in regulatory approvals, getting a patent, acquiring licenses. Moving to a new facility may mean additional unbudgeted expenses.
Credit, used carefully, can help solve these situations and others. It can be a cushion against the unknown and a good financial management tool.