How You Can Use Line Of Credit To Grow Your SME

Posted by Team Finaxar on Jun 15, 2019 1:39:00 PM

How You Can Use Line Of Credit To Grow Your SMEGrowth of your business depends largely on the working capital and cash flow. An unexpected gap in cash flow can seriously affect the growth of your business. When it comes to SMEs, getting quick funds to clear this gap becomes difficult. Having a line of credit ready for your business keeps you prepared to face such situations.

We have explained what a line of credit is and how Finaxar Credit Line works in one of our previous blog posts. Let’s discuss how you can take advantage of a line of credit for growing your business.

Expanding Your Company

Expanding your business may call for hiring new employees, building new facilities or expanding your sales arena. Sometimes, you may not have the funds to meet these needs ready. With a line of credit approved for your business, you can withdraw the amount whenever you need. Having a particular amount reserved as an emergency fund will help you make these tasks possible at the time of need.

Taking an example of a small scale retailer, John. His plan to expand his retail shop is always being postponed due to insufficient funds. Operational costs and utility bills consume the majority of his cash flow and some are tied up in other places. Line of credit offers you an assurance that there is fund readily available when you are in need. With an approved credit line to his business, he has enough funds available for him to use for buying new supplies or inventory to expand his business.

Fulfilling seasonal demands

A common problem faced by the SMEs is having their funds tied up in receivables. In an in-season period, you may need additional supplies and resources to fulfill the customer demands and cope up with the competition.

Applying for a loan or other financial aids in those times may not offer immediate funds. A line of credit in the name of your business keeps a certain amount ready for you to withdraw anytime you need.

For example, a restaurant may have to serve for double or triple the amount of customers during the festive season, like in the time of Hari Raya Puasa. You will need to be prepared for the increase in total orders during these times. The immediate funds available can help you with the addition of food items or taking in more employees.

Coping up with Off Season

Off-seasons can bring down sales and cause a dip in your cash flow expectations. Even though a good cash flow forecast of your business estimates this depression, it becomes difficult to meet the ends in such times. With the line of credit, you can withdraw the amount necessary to fulfill your needs.

When you are running an SME, you may face a cash crunch when your business is not doing well. However, you need to retain your employees and pay them off regardless of the company’s financial status. You can take up this amount from your credit line and have your employees stick to your company which is crucial for your business growth.

Building your inventory

In case you have not allocated an amount for building your inventory, using an amount from your credit line can help you with that. Making use of this amount with an estimated ROI from the marketing efforts won’t be a bad idea and will lead to your business growth.

Let’s say you need an estimate of $10,000 for your inventory and you don’t need that amount altogether. If you apply for a traditional loan, you will be approved a certain amount. Whether you use it or not, you will need to pay back interest on the total amount approved.

 

Whereas, with the line of credit, you can get approved for a certain amount, withdraw any amount within that limit any time you need, and repay with an interest only on the amount you used up.

Additionally, with Finaxar Line of Credit facility, you don’t need to reapply to avail the amount you repaid.

Investing in Marketing

When it comes to keeping up with the competitive market, it is necessary to stand out of the crowd and reach your target. The best way to reach your SME’s potential customers is through marketing. Marketing your products and brand takes a chunk of your working capital and it is essential for the growth of your business.

Let’s look into an example of an e-commerce site. With the rise in online shopping, you need to reach your targets faster and timely. Marketing your online platform helps you with attracting more customers. However, your available funds may not be enough to carry out such growth practices.

Using a calculated amount for marketing with an estimate of ROI and long term goals can benefit your business. You can withdraw this amount from your line of credit if and when you fall short of funds for marketing and increase your sales.

Get a line of credit when your business is doing good

A financial crisis led by unfortunate incidents is something you cannot predict. However, you can always be ready with an emergency fund for your business needs. Line of credit gives you the security of having funds available anytime you need them.

It is not wise to apply for external financial aid when your business is running low. The facilities like the credit line are meant to help you overcome your cash flow gaps that can stop your business growth. Make sure you apply for these services when your business is doing well.

To conclude,

Line of credit is a financial service where you are approved of a certain amount to lend. You can withdraw any amount under the approved credit limit and need to pay interest only on this withdrawn amount. Finaxar Credit Line is a line of credit service designed for businesses of different sizes. It stands apart from other services for its easy application procedure, flexible repayment schemes, and one-time financial fee.

If you are still confused about getting a line of credit for your business, you can always speak with our customer support team by leaving a message or calling us. You can apply for Finaxar credit line by signing up here.

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