As critical sources of capital, short-term lines of credit can be a cost-effective way for a business to obtain the funds it needs, when it needs them, and can provide companies a route to leverage opportunities for growth. Short-term lines of credit offer the flexibility business owners need, such as paying interest only on the amount spent and being able to draw on the business line of credit whenever necessary.

What is a short-term line of credit?

Unlike a long-term loan, a short-term line of credit granted to a business is a debt that must be repaid within a 12 month period. Sometimes the short-term line of credit is structured as part of a larger loan, but it still has the same 12-month expiration.

When can your business benefit from a short-term line of credit?

In this fast-paced and constantly evolving world, a host of unforeseen external and internal factors can disrupt the business landscape with little warning. While businesses may include a line item in their budgets to cover unexpected expenses, sometimes there simply isn’t enough available working capital. In other instances, a delay in a customer paying an invoice can leave a gap in the business’s ability to make payroll. In situations like this, a short-term line of credit can be a convenient option to bridge the gap.

Tips on how to use your short-term line of credit

A short-term line of credit should only be used when it’s certain the business will generate enough capital to repay the bank on time.

When a business uses a short-term line of credit, funds received should only be used for a predetermined business purpose such as an investment in new technology, expanding a marketing campaign or purchasing additional inventory to meet a higher demand.

After getting a short-term line of credit, the business should create a timeline for repayment and stick to it. This helps track how much to allocate for each month’s payment and more importantly, when the final tally will be paid off.

Businesses trying to reach their growth milestones but falling short of projections should consider the many benefits available by using a short-term line of credit. These financing solutions are often easier to obtain than traditional business loans, making them an ideal option for immediate financial needs.

In today’s fast-paced environment, businesses need a knowledgeable banking resource they can rely on to help determine if a short-term line of credit is an ideal solution for their company. Torrey Pines Bank offers a customer centric approach to banking. This commitment to learning about their clients’ businesses allows Torrey Pines Bank to provide the best possible financial products and professional services.

As a division of Western Alliance Bank, Member FDIC, Torrey Pines Bank clients benefit from the financial strength, capacity and sophisticated product offerings of a large bank along with the flexibility, deep regional knowledge and local leadership of a more specialized financial institution. This year, Western Alliance ranks #4 on the Forbes 2017 “Best Banks in America” list, which lists the nation’s top 100 banks based on 10 important metrics related to growth, profitability, capital adequacy and asset quality. (All offers subject to credit approval)

Information for this article was provided by Torrey Pines Bank. Learn more about how Torrey Pines Bank can help your business grow and evolve with a short-term line of credit by contacting your local banking expert. To contact your local banking expert, call the Downtown Los Angeles office at (213) 362-5200, the Beverly Hills office at (310) 623-8901, or visit torreypinesbank.com.

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