As we noted, the cons of a revolving line of credit can outweigh the positives. The key challenge is that businesses struggle to obtain this type of funding. In addition, in tight conditions, even firms with solid financial metrics might not obtain the same amount of funding as they have in the past.
Small businesses could consider other solutions like invoice factoring instead.
Invoice factoring has evolved into a leading solution to manage cash flow. Should liquidity challenges affect major companies – small- to mid-sized businesses can use existing customer invoices to get working capital immediately.
Many companies use credit lines and pay interest to fill cash flow gaps and waiting for slow-paying customers to pay outstanding invoices. Instead, they can get immediate positive cash flow by selling their outstanding receivables for the full value minus a small fee.