Line of Credit
Definition
A flexible loan with a set limit that you can draw on, repay and draw again, paying interest only on what you use.
Want a deeper explanation?
A line of credit fits seasonal inventory businesses well because borrowing can follow your buying cycle. The best time to get one is before you need it.
Banks usually want reliable financial statements, and some require the balance to be paid to zero for a period each year. Watch for: using the line for long-term costs like losses or equipment, which leaves nothing for inventory when you need it.
Example
With a $250,000 line, you draw $150,000 in August to fund holiday inventory, repay it from December sales and pay interest only for the months it was out.