Line of credits, when should you use them? One big mistake many businesses often make is co-mingling their lines of credit with their operating account. When you have a loan, the best strategy is to establish the best line of credit you can, not use them, and pay off your debt as fast as you can. If you cannot pay off your debt, “you’re not making money”, says Louis Mosca, executive vice president and COO of American Management Services, Inc., which works with small and mid-market businesses to optimize their operations.
Therefore, meeting your lender and showing them your progress and renewing your line of credit is what you should aim at doing. This helps establish a good line of credit as long as you remember to use it for emergencies and not for daily use. There are always exceptions to the matter, in the case when a line of credit is solely given for a special purpose such as manufacturing desired output of a good, however in most cases, a line of credit should only be used as a backup option, says Mosca.
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