Businesses Best Suited for Business Line of Credit

Some businesses produce more than enough cash flow to sustain the operations on an ongoing basis without needing to take on the liabilities associated with a credit facility. These businesses are most suited to take out a business LOC during times of expansion rather than financing the day to day operations of the business. For other businesses (such as large scale distribution firms, manufacturing companies, and other capital intensive businesses), a business loc may be the only way to conduct business. Below is an overview of the types of businesses that are most suited to use a credit facility:

Most Suited

Manufacturing Companies
Retail Businesses that carry extensive inventory
Wholesale Distributors with substantial inventory
Service firms that carry substantial amounts of accounts receivables
Medical Product Distributors
Pharmacies and Pharmaceutical Companies

Partially Suited

Firms that are undergoing a significant expansion over a set period of time
Companies that have irregular cash flows but regularly fixed cost expenses
Professional Service firms that receive government payments
Law Firms
Medical Practices and Allied Health Professional Practices

Ultimately, it is up to you to determine whether or not your business truly does need a business LOC. As always, you should speak to your accountant to determine your cash flow needs and whether the acquisition of a revolving credit facility is in your best interest. If you have additional questions whether or not your business is suitable for a business line of credit then you may also want to a specialty business advisor that has an extensive understanding of business credt.