A line of credit for your business: a lifeline or a rope to hang you?

A few years before I began freelancing full-time, I had the good luck to become friends with a financial planner. At the moment I was working full-time for a world-renowned advertising agency and I was pulling in a good salary. Financial problems were the furthest thing from my mind, but my friend insisted I apply for a line of credit for a rainy day emergency. His advice paid off because a few years later I used that line of credit to help jump-start my full-time freelance business.

The best time to apply for a line of credit is when you are already employed full-time. This way the bank is more likely to give you an amount of credit sufficient to meet all your emerging needs. Think of the line of credit as your insurance policy and not another bank account or credit card. You will need to suppress the impulse to shop until you drop. I will talk more about that later when you consider updating your software and purchasing the $2500 PDA with built-in digital camera and electric toothbrush. Like my friend said, the line of credit is more like a rainy day fund to help get your new business through the rough spots.

I recommend anyone who is going to jump into the freelance business full-time to either save enough money to cover your expenses for at least three months, or to obtain this line of credit. I do not claim to be a business or financial expert (keep in mind I have a visual art’s degree), but my own experience has taught me that running your own business can have numerous ups-and-downs. You need to be prepared for when you experience the down times.