Unlocking Financial Growth: Leveraging Lines of Credit for CPG Businesses

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Foodbevy

Unlocking Financial Growth: Leveraging Lines of Credit for CPG Businesses

by Foodbevy

September 27, 2023

Running a Consumer Packaged Goods (CPG) business demands substantial working capital to sustain inventory and daily operations. However, in a landscape where cash often gets tied up in existing inventory or accounts receivables, strategically harnessing lines of credit becomes a pivotal resource for sustainable growth. In this article, we will delve into what lines of credit are, when and how to utilize them effectively, and the steps to secure one for your CPG business.

Understanding Lines of Credit

A line of credit is a financial tool that allows you to borrow up to a predetermined amount of money at a fixed interest rate. What sets it apart from traditional loans is the flexibility it offers: you only pay interest on the amount you are currently borrowing. This stands in contrast to traditional loans, where you receive a lump sum upfront and then repay it with interest over a predefined period.

When Should You Consider a Line of Credit?

Lines of credit are most effective when you need working capital to bridge gaps in your cash flow. Imagine you are tasked with producing inventory for a new retailer. Typically, you must front the cost of production, hold the inventory, and then send it to the retailer or distributor. However, you may face a waiting period of 30 to 90 days before you receive payment from the retailer. In such scenarios, a line of credit becomes an invaluable tool to ensure you have the necessary cash on hand during this waiting period.

For newer businesses, it’s advisable to use a line of credit for expenses directly tied to sales. This is because such debt carries tangible consequences if left unpaid. Avoid using it for speculative purchases unless you have a clear and viable plan to repay it promptly.

Securing a Line of Credit

Securing a line of credit for your CPG business involves engaging with banks and financial institutions, such as Aion, which offers this financial instrument to support businesses. The key qualifications for obtaining a line of credit include your business’s financial stability, your business’s existing debt,  your growth rate and your relationship with the bank. Keep in mind that lines of credit often start with smaller limits, allowing you to establish a credit history with the institution. Over time, as you demonstrate financial responsibility, these limits can be raised.

Explore Aion’s Line of Credit Options

Aion specializes in providing revolving lines of credit and short-term loans tailored to address cash flow gaps and fuel the growth of businesses. Their offerings range from $10,000 to $5 million and can be secured against inventory or receivables, with repayment terms designed to align with your specific needs.

To learn more about Aion and how their financial solutions can benefit your CPG business, visit Aion’s Partnership Page.

Testimonial from Purely Elizabeth

“In the early days of Purely Elizabeth, we needed to keep up with increasing demand. Aion provided flexible, non-dilutive funding that grew with our business and helped us scale.”

Mark Freeburg
Chief Financial Officer
Purely Elizabeth

Lines of credit are a dynamic financial tool that can empower your CPG business to navigate cash flow challenges, seize growth opportunities, and ultimately thrive in a competitive market. Consider exploring the possibilities of a line of credit to drive your business forward.

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