Should your organization use a Line of Credit (LOC)?
You should have one. Here’s why:
- It’s a financial insurance policy. Business cash flow has ebbs and flows. This helps to level these ups and downs.
- It allows you to serve your clients and pay for your Cost of Goods Sold (COGS) before being reimbursed by your client.
- You want to maximize your financial options.
But don’t become too dependent on it. Keep in mind that all debt is not created equal.
This is a list of the most stable debt tools you can be using from most to least secure, as confirmed by banking experts:
- Hard asset debt including buildings and land.
- Equipment debt.
- Lines of Credit.
In other words, in general, Lines of Credit are terminated more frequently by lenders than other forms of debt.
Buyer beware, but a Line of Credit could make great sense for your organization.
