When business owners think of loans and financing, the assumption tends to be that loans and credit are a last resort for struggling businesses; a lifeline when cash flow takes a hit. And while carefully considered financing options can be a source of relief in those moments, it’s a misconception that borrowing is only for getting your business out of a tough spot. On the contrary, small business loans and financing are also (if not more so) a great way to invest in your thriving business and help it grow.
With the right strategy in place, financing business growth through a line of credit is a smart long-term growth strategy that can set your business up for continued success. It can help you expand faster, increase revenue, and take your business to the next level. The key is to invest the extra funds into areas of your business where they can have the highest ROI. Learn how a business line of credit can be the secret to scaling.
How does a business line of credit compare to other forms of financing?
There are several different types of financing you could tap into for your business, but what sets a business line of credit apart is that it’s revolving. It works the same way as a credit card—each time you pay down the principal and interest on your line of credit account, your funds get replenished, and you regain access to the total balance of your pre-approved credit line.
There are a few advantages to using a business line of credit, one of the biggest being flexibility. It gives you a certain amount of readily available funds to draw when—and only when—you need it to fund ongoing or short-term business expenses. A line of credit can also boost your credit score, make your business more adaptable, and help you achieve a steady cash flow, even during traditionally slow seasons.
Plus, while some lenders charge annual fees and high interest rates, Bluevine’s line of credit comes with minimal fees so that you can reap all the benefits of this pay-as-you-go lending product without racking up unwanted expenses as a tradeoff.
What are some ways to use line-of-credit funds to grow your business?
By giving you fast access to working capital, a business line of credit is a good option for short-term growth expenses that will increase your business’s profit in the long run. Here are a few of the ways that you can tap into the extra cash to support your long-term growth:
Stock up on inventory.
Every business needs inventory to drive sales, and a line of credit helps ensure that you’re always stocked up. A line of credit allows you to purchase increased inventory at key moments in your business cycle, such as ahead of busy seasons. By identifying trends based on your sales history, you can use a line of credit to increase your stock of inventory ahead of periods where you expect an influx of sales. That way, when consumer demand goes up, you’re ready to meet it. This not only helps eliminate lost sales but can increase brand loyalty and return business over time.
Invest in the right technology.
As your business evolves, it’s crucial to adopt the right tools and technology to help support sustainable long-term growth, and a line of credit can give you the money to do it. For example, you might use your line of credit to invest in a strong customer relationship management (CRM) system. Not only will this help improve customer acquisition, but it will strengthen your business’s relationship with existing customers, which can boost retention, drive repeat sales, and increase profits by 25-95%. Not to mention, satisfied customers often turn into brand advocates who promote your business through word-of-mouth marketing.
Other areas of software and technology that you can invest in could be data management, enterprise resource planning, marketing automation, and human resources.
Amp up your marketing.
Marketing is a fundamental component of growing a business as it allows you to reach new prospects and increase brand awareness. And yet, about half of small businesses operate without any kind of marketing strategy, with budget constraints factoring into that.
A line of credit gives you the flexibility to create a marketing plan and budget that can help attract new customers and drive a significant spike in sales. Let’s say you choose to apply marketing funds to email, for example. A well-planned email marketing strategy can give you an ROI of 4,200%, meaning that your return on every dollar spent is an impressive $42. You might also choose to put money behind Google Ads, where the average return is 2x your investment. Testing marketing avenues and exploring new opportunities is a great way to take your business to the next level, and a line of credit ensures that you have the money to invest in that growth.
Boost your online presence.
We live in a digital world, and the businesses that thrive will be the ones that evolve to meet consumers where they spend most of their time: online. Building a robust online presence is a critical part of growth as it helps shape your brand identity and hook new customers. Over 70% of consumers report judging a brand based on its website, so if your business is making a poor first impression online, it could be costing you tons of leads and revenue. With a line of credit, you’ll have readily available funds to invest in UX/UI design and website optimization, which can boost your brand’s credibility, attract new leads, and increase conversions by up to 400%.
Cover seasonal lulls in business.
Because a line of credit is best used to increase your business’s profitability, it may seem counterintuitive to apply borrowed funds to covering seasonal slowdowns. The trick here is only to use your line of credit to cover seasonal lulls when you have a strong game plan of how you’ll make up the sales once the slow period ends. If you know your business cycle well, you can thoughtfully use a line of credit to cover overhead expenses during your slow season, knowing that an influx of sales will balance things out down the road. This matters because sustainable growth relies on steady momentum, so supplementing your sales cash flow with a line of credit helps ensure that you don’t miss a beat when things pick back up for your business.
