Managing your Business's Cash Flow: The Operating Line of Credit

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As a small business owner, you’re likely no stranger to the concept of cash flow. Simply put, it’s the money coming in and going out of your business, serving as your organization’s lifeline. At one point or another, many businesses face challenges with cash flow, and you can’t always predict what financial issues may arise down the road. Thankfully, there are a range of cash flow management tools to help get you through short-term financial struggles. To kick off our three-part summer series on managing your business’s cash flow, allow me to tell you about the Operating Line of Credit

What is an Operating Line of Credit?
Similar to a Personal Line of Credit, an Operating Line of Credit offers an amount of credit available to you, the borrower, at a predetermined level suitable for the needs of the business. As I mentioned, the Operating Line of Credit makes an ideal cash flow management tool through which you’ll have access to credit on an as-needed basis to help you manage any short-term cash flow shortages you may encounter. The borrower can use the Line of Credit at any time, as long as the limit is not exceeded. While it’s not always mandatory to pay the amount borrowed off in full every month, I do recommend having a financial plan to make payments periodically.

Could an Operating Line of Credit help your cash flow?

Operating Lines of Credit are ideal for businesses that have seasonal or periodic variability in cash flow. For example, if you're the owner of a small retail store and nearly 65% of your profit is brought in during the summer months, an Operating Line of Credit could help you with your expenses during the other nine months of the year, knowing that the summer months will help to pay off the credit you use. It can also be used to assist with the timing of your payables and receivables. Let's say a construction company has just completed a job and they expect payment for the job within 60 days, but the cost of the materials is due in 30 days. The company can use the Operating Line of Credit to float their expenses for the interim period. It's important to note that an Operating Line of Credit should never be used to bail a business out of serious, ongoing financial problems. Rather, it's there as a short-term 'safety net' to be used and eventually paid off, then used again as needed. 

CUA is here for you. 
At CUA, we know that no two small business operate the same way. Our Commercial Team will take the time to get to know your business to help determine the best ways to manage your cash flow in a cost-effective, efficient way. For Operating Lines of Credit, we offer competitive rates and you'll pay interest-only on any amount borrowed. If you think an Operating Line of Credit could be a great solution for your short-term cash flow needs, we would love to chat with you further. Please contact us about your business needs at, or phone 902.492.6500 for more information. 

Revised Jul. 26, 2021

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