Reasons Small Businesses Use Revolving Credit

Just like the economy, businesses go through periods of having more and less cash available to them. For small businesses, especially in their early periods, it is normal to start out with relatively low cash flow. Traditionally one might apply for a business loan, however, there are alternative options that generally have a quick approval process that can be pursued, such as revolving credit.

What Is Revolving Credit

At its core, revolving credit, is a type of arrangement that lets you to withdraw a loan amount, repay it, and withdraw again, in a similar fashion to consumer credit cards. Revolving credit has become a increasingly popular choice for business owners, given the flexibility it provides and the relative relative speed, compared to seeking a loan.

By using revolving credit, a business can borrow money when they need it and do so continuously, rather than getting a lump sum from a traditional loan and needing to deal with fixed payments. Of course, interest and additional fees may apply to whatever money is borrowed and a business owner must use discretion when they are tapping into funds.

Why Choose Revolving Credit

There are many reasons a business might choose to use revolving credit rather than a business loan or other ways of opening up cash flow.

  • Day to Day Operations – While you wouldn’t want to rely on revolving credit year round, using it as temporary fix for day-to-day operations during slower periods can help keep a business afloat.
  • Seasonal Fluctuations – For business who experience an ebb an flow, say between holidays of slower production cycles, revolving credit can maintain positive cash flow until busier periods.
  • Vendor Payments – If vendors need to be paid before you’ve had a chance to sell product, revolving credit can all you to fulfill payments before you make the money back.
  • Inventory and Supplies – There’s no getting around acquiring inventory and supplies if you are going to survive as a business. If you need to keep inventory up, but have a shortage of cash, revolving credit is a great temporary solution.

Since revolving credit is open-ended, has no fixed monthly payments, and you pay interest and fees only on the money you actually borrow, revolving credit could be just what your business needs for the sake of healthy cash flow.

You’re in the Right Spot for Revolving Credit

If you are looking to improve the cash flow of your business, or require working capital for business purpose, apply for a business line of credit today. You can do so by contacting our team of lending professionals at Davis Commercial Finance at your convenience.


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