Securing a line of credit for your small business can be the first step towards a host of growth opportunities and steadier cash flow management that sets you up for greater success in the long term. And because many lines of credit are revolving and come with the benefit of allowing you to draw only what you need when you need it, they provide a flexible working capital solution when compared to options like term loans, which give you a lump sum you need to pay back in full over time.
To get a better idea of all the ways you can strategically use your business line of credit to benefit your small business and invest in short-term goals, here are tips for using your funds to move your business forward.
Invest in lead-generating digital marketing.
When you’re a newer business, it’s not always easy to invest a ton of capital into marketing. Luckily, there are plenty of low-cost options for generating leads when you’re starting out, such as tapping into the power of word-of-mouth marketing. However, as your business grows, it’s critical to develop a more robust marketing strategy—which often means putting more money behind lead generation.
How to use your line of credit: Invest in a team or agency that can assist with things like paid search, programmatic advertising, and native digital advertising to expand your business’s reach and ramp up your acquisition efforts.
Optimize your website and online presence.
The importance of a well-optimized business website may be more obvious if you run an e-commerce brand or a business that specializes in digital services, but the reality is that a strong web presence is crucial to every business, regardless of your industry or offering. Your business’s website is a way for you to establish credibility, communicate your brand’s story and values, and hook prospects who discover you organically online.
How to use your line of credit: Work with a web design agency to create a visually-appealing website that is optimized for user interactions, search engines, and conversions. Make sure that your optimized website also includes key components to help your business connect with prospects and convince them of your value. This might include reputation-building content (e.g., reviews, case studies, portfolio), a founder story, and contact information.
Fix or replace your equipment.
From computers and phone systems for office-based businesses, to POS systems for retail businesses, to specialized machinery for businesses like construction companies, reliable equipment is a crucial part of smooth business operations across industries. That said, if your business’s equipment isn’t up to date or working properly, it can put a serious snag on your workflow and ability to complete day-to-day operations, let alone grow your business.
How to use your line of credit: Purchase equipment quickly and with more freedom—e.g., investing in custom-made equipment that you may not be able to finance through traditional equipment loans. And because a line of credit allows you to draw funds and purchase equipment using cash, it gives you the added benefit of being able to negotiate on the price for pre-owned equipment.
Improve your software and technology.
Similar to the importance of reliable equipment, utilizing advanced tech platforms and software solutions can be a great way to optimize business operations and make some of the regular tasks of running a business—e.g., payroll, project management, and new hire onboarding—a bit more streamlined.
How to use your line of credit: Identify the tech systems that can have the biggest immediate impact on your business and invest in them accordingly. This might include a customer relationship management system, a data security solution, or an inventory management software. You might also decide that the tech your business could benefit most from in the near term is marketing technology, such as social media automation tools.
Invest in growing your team.
As your business grows, so will the workload that you and your team have to manage. Achieving sustainable growth often means having to scale your team as you scale your business, which can mean either hiring new full-time employees or engaging an agency or consultant for outsourced support.
How to use your line of credit: After determining the best hiring plan for your business, you can tap into your line of credit funds to invest in recruiting support to find the best candidates or partners to help you scale your business. Another important part of successfully bringing new team members on board is having a strong onboarding process in place, which often requires a bit of investment.
Create new revenue streams.
One of your biggest goals as a business owner is to generate revenue, and diversifying your revenue streams can help you not only increase the amount of money flowing into your business, but also minimize the risk of cash flow gaps throughout the year. In many cases though, increasing revenue through things like online courses can require a little extra investment upfront, after which a lot of the methods can bring in passive revenue with minimal ongoing cost.
How to use your line of credit: Create a plan for the revenue diversification strategy that your business wants to test out, whether it’s a series of online courses, a paid ebook, a paid newsletter, or something different. From there, determine the tools and investment necessary to follow through. For example, launching a series of online courses might require an investment in video production, while a paid newsletter might require an ESP upgrade or investment in copywriting services.