Do I Need a Line of Credit?
It’s a question I hear often: “Should I get a line of credit for my business?”
The short answer is — it depends.
A line of credit can be an incredibly useful tool for small business owners, especially those in the health and wellness industry where income can fluctuate seasonally. But like any financial tool, it’s only helpful if it’s used wisely and with intention.
What a Line of Credit Actually Is
A line of credit is a revolving form of financing that allows you to borrow up to a certain limit, repay what you use, and then borrow again as needed. Think of it as a safety net — not a source of extra spending money.
Unlike a traditional loan, where you receive one lump sum and start making payments immediately, a line of credit gives you flexibility. You only pay interest on what you actually use.
When a Line of Credit Can Help
A line of credit can be a smart move if:
Your business experiences seasonality — for example, slower months in the summer or winter when revenue dips but expenses continue.
You want cash flow coverage for short-term needs — like making payroll before a large client payment clears.
You’re planning for growth and want access to funds for new opportunities without needing to apply for a new loan each time.
It’s not a sign of weakness — it’s a sign of preparation.
What to Consider Before You Apply
Before opening a line of credit, it’s important to take a realistic look at your habits and your business’s needs. Ask yourself:
Do I trust myself not to use it for unnecessary spending?
Do I understand the fees and interest rates my bank charges?
Does my business have the discipline to repay it quickly?
Is there a clear purpose for this line of credit — or would it just become a crutch?
If you find yourself dipping into it regularly for non-emergencies, that’s a sign to revisit your cash flow strategy instead of relying on borrowed funds.
When a Line of Credit Isn’t the Answer
A line of credit isn’t meant to cover ongoing losses or fund a business that isn’t generating enough revenue to sustain itself. It’s a tool — not a solution.
If you’re consistently short on cash, it might be time to review your pricing, expenses, or payment timing rather than leaning on borrowed money.
Know Yourself and Ask Questions
A line of credit can be a valuable resource when used strategically. It provides flexibility, peace of mind, and breathing room — but it also requires discipline.
If you’re unsure whether your business is ready for one, talk with your CPA or financial advisor. Understanding your cash flow habits and the purpose behind the credit line is the key to making it work for you, not against you.
