New businesses aren't the only ones in need of cash. Seasonal sales, sudden growth or slow account receivables can leave any retailer in a cash crunch. Lines of credit can help smooth out the ups and downs of cash flow problems.
A line of credit is a pre-established loan authorization with a specified borrowing limit. It is generally established with a bank, but can be issued by a business, individual or other lender. Lines of credit are based on creditworthiness and allow the borrower take specific amounts up to the limit, repay it at any time, and withdraw it again.
Most new retail businesses won't qualify for a line of credit without the owner's personal guarantee of repayment. Even then, a banker may require the line of credit to be secured with a second mortgage or other assets.
Well-established businesses may receive unsecured lines of credit when they can show the creditworthiness with financial statements to show a strong ability to repay.
