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What You Need to Know About Credit Lines Our expert tells whether you need a line of credit and how big that line should be.

By Joe Worth

This story appears in the January 2015 issue of Entrepreneur. Subscribe »

illustration © Gillian Blease

Q: Should I open a line of credit, and how much should I have available?

A: If a business experiences significant revenue swings, a credit line might be just the right tool to help manage short-term cash and working capital needs.

Manufacturers of seasonal equipment are among the types of businesses that could make good use of a line of credit. Take a factory that builds lawn mowers: It manufactures through the fall and winter, and delivers most of its inventory to retailers in the spring for sales through the summer. The company is spending money to build mowers in October that it might not get paid for until June.

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