What is an Operating Line?

An operating line of credit allows you to overcome short-term cash flow problems. The operating lines allow you to take money out on an as-needed basis. The line of credit is open up to a set amount, or your credit limit. You can borrow up your cash amount and pay off the loan in monthly installments. The line remains open for an established period of time.  

Who Benefits from Operating Lines?

Operating lines are best for businesses that have seasonal, or periodic stalls in cash flow. Construction companies are a great example. Many construction companies have cash in the summer months, but the winter weather provides them with less work and less money. In order to finance their existing projects, a construction company will draw upon their line to pay employees, office expenses and material costs.

What are the Risks of Operating Lines?

It is easy to spend a lot of money on interest with operating lines because the money is easy to access. However, the money has interest charges attached, so you must be careful when taking money from your line. It is best to pay off the line each month and use it for emergencies only, to avoid problems in the end.