Growing Through Credit: How to Use Your Business Credit to Fuel Your Company Growth

According to the Small Business Administration (SBA), there are about 30 million small businesses in the U.S. These businesses make up most of all U.S. businesses. It’s common for these businesses to use finances throughout their operations, whether for emergencies or other business functions. However, not many companies use their credit lines efficiently.

Proactive usage of business credit is vital for a small business to thrive. It’s a delicate balance of choosing where you need to spend your credit and when to pay it. Not a lot of small businesses know exactly where to spend their credit on. Some of these businesses rely on their credit only for emergencies. This reactive way of using business credit can be detrimental to your business’s growth as you are not maximizing the output you can get out of your loans. So here are some ways you can use your business credit to fuel your company growth.

Hire More Employees

Statistics have shown that many small businesses would like to hire more employees but cannot afford it. These businesses decide to wait until next year to get the cash flow they need to hire employees. This can lead to expansion plans being scrapped or delayed, decreased business output, and an overall decrease in revenue. Many might not see it, but the income you could have earned is revenue lost throughout the year. This is why you should try using your business credit to pay for your employees.

For every company with a plan to expand, you’re wasting precious time by waiting for enough cash to pay needed employees into your business operations. Chances are, you’re wasting your hard-earned money as well. If you’re looking to reach a goal next year, why not start this year? The best thing about business credits is that there is a given amount of time for you to pay the loan’s cost. So when you hire an employee who can bring in more work into your business, the credit you got to pay for that employee is already paying itself. So don’t be scared to use your business credit to expand your human resource. It can pay off in the long run.

New Equipment

Equipment can be a costly investment, and the cash you have right now might not be enough to get the gear you need. The worse part about equipment is that they depreciate throughout the years, meaning that the longer they are being used, the less money you will get out of them. This means that using a credit line in buying new equipment can cost you more than what it can earn back. But they are essential to every business growth. And much like employees, if you don’t have them right now, you’re losing revenue that you might have obtained. However, there is a way for you to get the new equipment you need through credit, without losing as much money. That way is through refinancing.

Refinancing is the process of replacing an existing debt to renegotiate its terms. So technically, you can align your loan with the depreciation value of the equipment you’re planning to buy. For example, suppose you have an existing vehicle loan and want to buy a new vehicle for your company. In that case, you can refinance the previous loan to meet the depreciation value of your new vehicle. This is great for transportation services such as trucking as they can increase the amount of the equipment they need drastically without worrying about recurring costs from depreciation.

Boost Inventory

If you’re in the field of merchandising, inventory is your primary concern. You can’t run your business without merchandise, and saying no to customers will only hurt your business even more as this can ruin the relationship you have with them. Once again, getting a loan is your friend.

Boosting your inventory is an essential factor in growing your business, especially during busy periods of the year. Of course, it’s recommended not to get more than what you can chew. Still, with the business world’s competitive nature today, you need to get every advantage you can get. Refinancing is also possible here as you can use that loan to buy more inventory.

Although there isn’t a set limit to how many times you can refinance a loan, you shouldn’t keep doing it either. Remember that when you refinance, you haven’t paid the original value of that loan. So the best way to do this is to refinance once until you can afford to do so again.

Now, we don’t want you to go and get a credit line for each of the recommendations we placed on this list. Ultimately, you want to manage how much credit you use for your business, and the best way to do that is only to take a loan if you have the cash flow to provide for it. If you can’t afford to calculate that, make sure that your credit does not exceed your company’s projected revenue for the year. You can even use your company’s previous revenue as a benchmark to make sure that you don’t exceed your credit line.

Meta Title: Creative Ways to Use Your Business Credit to Grow Your Company

Meta Description: Maintaining a healthy business credit line can be very beneficial for your business. Here are some ways you can use that credit to help grow it.

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James Harrison: James, a supply chain expert, shares industry trends, logistics solutions, and best practices in his insightful blog.