Some small- and medium-sized business owners might be wondering why they would ever need a line of credit for their business. Cash flow is fluid, there’s always more in accounts receivable than accounts payable, revenue is strong, and they’re not having any trouble making ends meet.
While that’s a great situation to be in, things can change quickly. Unexpected expenses can happen. A key employee quits. A natural disaster disables your building or the clients simply start to dry up. Whatever situation applies to you, there comes a time in every business when there’s not enough cash to go around.
It’s for times like these that lines of credit for business were created. Allowing for a kind of liquidity safety net, business lines of credit allow businesses of all sizes to meet their repayment obligations without becoming insolvent in the event of a temporary interruption to their revenue.