Insights 2min(s)

Credit Line Benefits

Phil Simmons, Senior Business Development Manager for Professions Finance at Shawbrook, explains the benefits of using a credit line facility to fund annual tax, VAT, and professional indemnity insurance liabilities.

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At a glance

  • Phil Simmons, Senior Business Development Manager explains the benefits of a Credit Line for Professions clients

The January tax bill is just the first of several financial obligations your clients will have to manage this year, each having an impact on their cash flow.

To help businesses manage cash flow more effectively and give them surety of funds throughout the year, a Credit Line can be a valuable financial tool.

Phil Simmons, Senior Business Development Manager, Professions Finance at Shawbrook, explains the benefits of using a credit line facility to fund annual tax, VAT, and professional indemnity insurance liabilities, thereby smoothing cash flow and preserving working capital for other expenses and growth initiatives.

1. Smoothing Cash Flow

One of the primary benefits of a credit line facility is its ability to smooth cash flow. Professions businesses often face significant cash outlays at specific times of the year, such as when paying annual taxes, VAT, and insurance premiums. These large, lump-sum payments can strain a company's cash reserves. By using a credit line facility, businesses can spread these payments over time, reducing the immediate impact on cash flow and ensuring that they have sufficient funds available for day-to-day operations.

2. Preserving Working Capital

Working capital is essential for maintaining the liquidity and operational efficiency of a business. By utilising a credit line facility to cover large, periodic expenses, businesses can preserve their cash for other critical needs. This ensures that funds are available for inventory purchases, payroll, and other operational expenses, which can help maintain smooth business operations.

3. Flexibility and Convenience

A credit line facility offers flexibility that other forms of financing may not provide. Unlike a traditional loan, which provides a lump sum that must be repaid over a fixed period, a credit line allows businesses to draw down funds as needed, up to a predetermined limit. This means that businesses only pay interest on the amount they use, making it a cost-effective solution for managing cash flow.

4. Supporting Growth 

By freeing up working capital, businesses can invest in new projects, expand their operations, or take advantage of new opportunities without worrying about cash flow constraints. This can lead to increased revenue and profitability in the long term.

5. Improving Financial Planning

Having access to a credit line facility can improve a business's financial planning and budgeting processes. With a reliable source of funds available, businesses can plan for large expenses more effectively and avoid the stress of scrambling for cash when payments are due. This can lead to more accurate financial forecasting and better overall financial management.

Highlights of a Shawbrook Credit Line facility:

  • Dedicated Business Development Manager
  • Simple, straightforward electronic documentation
  • Payment to your client or to HMRC

If you are a broker and are interested in working with us to support your clients, get in touch today.

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