Line of Credit Management Guide

Overview

This guide shows you how to use Ouro Cash Flow to project when you'll need to draw on your line of credit (LOC) and when you can pay it back. The goal is to minimize interest costs by drawing only when necessary and repaying as quickly as possible.

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Key Principle: Borrow only what you need, when you need it, and pay it back as soon as you have surplus cash. Every day you reduce your LOC balance saves you interest.

Step 1: Set Up Your Cash Position & Line of Credit

Start by entering your current financial position in the Cash Position card at the top of the app.

Screenshot: Cash Position Settings

Shows the three input fields: Current Cash Balance, Line of Credit Limit, and Current LOC Balance

1

Current Cash Balance: Enter your actual bank account balance today. Keep this updated regularly for accurate projections.

2

Line of Credit Limit: Enter the maximum amount you can borrow from your LOC. For example, if your bank approved a $50,000 line of credit, enter 50000.

3

Current LOC Balance: Enter how much you currently owe on your line of credit. If you haven't borrowed anything, enter 0.

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Best Practice: Update your current cash balance at least weekly, or before making any important financial decisions. The more current your data, the more reliable your projections.

Step 2: Add Your Income & Expenses

Go to the Projection Items tab and add all your expected income and expenses.

Screenshot: Projection Items Tab

Shows the "Add New" button and the form for creating income/expense entries

1

Click "+ Add New" button

2

Fill in the details:

Start Date: When this transaction begins
Description: What it's for (e.g., "Customer payments," "Rent," "Payroll")
Type: Select Income or Expense
Amount: The dollar amount
Frequency: How often it occurs (one-time, weekly, monthly, etc.)

3

For recurring items, set an end condition if applicable (specific date, number of occurrences, or ongoing)

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Best Practice: Include all committed expenses (rent, payroll, loan payments, utilities) even if they seem small. Small expenses add up and affect when you'll need to draw on your LOC.

Step 3: Review the Dashboard & Alerts

The Dashboard shows your financial outlook at a glance and alerts you when action is needed.

Screenshot: Dashboard Metrics

Shows the 6 metric cards: Current Cash, Period Income, Period Expenses, Projected Cash, Lowest Point, and LOC Available

Understanding Dashboard Metrics

Current Cash: Your cash balance today

Period Income: Total revenue expected in the forecast period

Period Expenses: Total expenses expected in the forecast period

Projected Cash: Where your cash balance will be at the end of the forecast period (green = positive, red = negative)

Lowest Point: The minimum cash balance you'll reach and when. This is critical for LOC planning!

LOC Available: How much credit you have available now and at the end of the period

LOC Alerts

Screenshot: LOC Alert Banner

Shows the red warning banner that appears when cash is projected to go negative, with specific draw amount and date

When your projected cash balance will go negative, you'll see a red alert at the top of the dashboard:

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Heads up! You may need to draw on your line of credit
The alert tells you exactly how much to draw and by when, so you can plan ahead.

You'll also see a purple reminder when you have scheduled LOC transactions coming up in the next 7 days.

Step 4: Analyze Your Cash Flow Timeline

The Timeline tab shows your day-by-day cash flow projection with a visual chart.

Screenshot: Cash Flow Timeline Chart

Shows the line chart with cash balance over time, highlighting periods where balance goes negative

Reading the Chart

The line shows your projected cash balance over time
When the line dips below zero, you need to draw on your LOC
Green areas on the chart indicate positive balance
Hover over the chart to see exact balances on specific dates

Screenshot: Timeline Day Details

Shows the detailed daily breakdown below the chart with transactions and running balance

Timeline Details

Below the chart, you'll see a day-by-day breakdown showing:

All transactions occurring each day
Income shown in green
Expenses shown in red
Running projected balance for each day

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Key Insight: Look for the lowest point in your cash flow. This tells you the maximum amount you might need to draw on your LOC.

Step 5: Plan Your LOC Draws & Paydowns

Once you know when your cash will go negative, you can schedule LOC transactions strategically.

Adding a LOC Draw

1

Go to the Projection Items tab and click "+ Add New"

2

Set the Date to 1-2 days before you need the funds (based on your lowest point)

3

Select Type: LOC Draw (borrow)

4

Enter the Amount you need to borrow (typically slightly more than the negative balance to maintain a buffer)

5

Set Frequency: One-time (or recurring if you have predictable cash flow gaps)

Screenshot: Adding LOC Draw

Shows the form filled out with LOC Draw type selected

Adding a LOC Paydown

1

Look at your timeline to find when you have surplus cash (balance well above zero)

2

Add a new entry with Type: LOC Paydown (repay)

3

Set the Date when you'll have the surplus

4

Enter the Amount you can safely repay (leave enough buffer for operating expenses)

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Important: Always maintain a cash buffer! Don't pay down your LOC so aggressively that you immediately need to draw again. A good rule of thumb is to keep 5-10% of your monthly expenses as a cash buffer.

Step 6: Track LOC Interest (Advanced)

The app can automatically calculate interest charges on your line of credit balance.

Screenshot: Calculated Entry - LOC Interest

Shows the form with "Calculated" amount type selected and "% APR on LOC balance" calculation type

Setting Up Automatic Interest Calculation

1

Add a new entry and select Amount: Calculated (instead of Manual)

2

Select Type: Expense

3

Set Description: "LOC Interest" or "Line of Credit Interest"

4

In the calculation settings, enter your APR (e.g., 8 for 8%) and select "% APR on LOC balance"

5

Choose calculation method:

Average balance for period: More accurate, averages your balance over the month
Balance at end of period: Simpler, uses month-end balance

6

Set Time period: Same month for monthly interest charges

7

Set Frequency: Monthly to match your bank's billing cycle

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How It Works: The app automatically calculates interest based on your projected LOC balance. As you add draws and paydowns, the interest calculation updates automatically. This helps you see the true cost of borrowing.

Example: If you have an 8% APR and maintain a $10,000 LOC balance for a full month:

Annual interest = $10,000 × 8% = $800
Monthly interest = $800 ÷ 12 = $66.67

The app calculates this automatically and shows it as an expense in your forecast.

Best Practices for Minimizing Interest

1. Draw Just-In-Time

Don't draw on your LOC weeks in advance. Draw 1-2 days before you need the funds. Every day you carry a balance costs you interest.

Example: If you need $10,000 on March 15th, draw it on March 13th or 14th, not on March 1st.

2. Pay Down Immediately When Possible

As soon as you have surplus cash, pay down your LOC balance. Even paying down $1,000 early can save significant interest.

Example: If a customer payment comes in early, immediately schedule a paydown for that amount (minus your operating buffer).

3. Maintain a Small Cash Buffer

Keep a buffer of 5-10% of monthly expenses in cash. This prevents the "draw-paydown-draw" cycle that increases transaction costs and complexity.

Example: If your monthly expenses are $50,000, keep $2,500-$5,000 in cash at all times.

4. Review Weekly

Update your cash balance and review your forecast at least weekly. Things change—customers pay late, unexpected expenses arise. The sooner you know about problems, the better you can manage them.

5. Plan for Seasonal Patterns

If your business has seasonal cash flow (e.g., retail during holidays), extend your forecast to 6 months or more to see the full picture. You might need to maintain a higher LOC balance during slow months.

6. Use the Table View

Switch to the Table View tab to see monthly or weekly summaries. This makes it easy to spot patterns and plan your draws/paydowns strategically.

Real-World Example

Scenario: Small Business Managing Payroll Gap

Situation:

Current cash balance: $15,000
Biweekly payroll: $25,000 (due every other Friday)
Customer payments: $30,000/month (received around the 25th of each month)
Line of credit: $50,000 limit, 8% APR

The Problem: Payroll is due on the 10th, but customer payments don't arrive until the 25th. Cash will go negative.

The Solution:

Add all entries to the Projection Items:
- Payroll: $25,000, every 2 weeks, starting next Friday
- Customer payments: $30,000, monthly, on the 25th
- Other expenses (rent, utilities, etc.)
Check the Dashboard: Lowest Point shows -$12,000 on the 10th
Add LOC Draw: $15,000 on the 9th (enough to cover the gap plus a buffer)
Add LOC Paydown: $15,000 on the 26th (right after customer payments arrive)
Add LOC Interest: Calculated expense, 8% APR, monthly

The Result:

LOC balance is only $15,000 for about 17 days
Interest cost: approximately $15,000 × 8% × (17/365) = $56
Cash flow remains positive throughout the period
No surprises or overdraft fees

Optimization: If customer payments arrive on the 20th instead of the 25th, the paydown can happen 5 days earlier, saving ~$16 in interest.

Troubleshooting & Tips

Q: The app says I need to draw on my LOC, but I have cash in the bank. Why?

A: Make sure your "Current Cash Balance" is up to date. If it's an old number, the projection will be wrong. Update it to your actual balance today.

Q: My interest calculation seems wrong. What should I check?

A: Verify that:

You entered the APR correctly (8 for 8%, not 0.08)
The frequency matches your bank's billing (usually monthly)
Your LOC draws and paydowns are correctly entered
The time period is set to "Same month" for monthly interest

Q: Can I set up recurring LOC draws?

A: Yes! If you have a predictable gap every month (like the payroll example above), set the LOC draw to "Monthly" frequency. Just remember to also set up recurring paydowns when the cash comes in.

Q: What if my forecast shows I'll exceed my LOC limit?

A: This is a critical warning. You need to either:

Reduce expenses where possible
Accelerate revenue collection (offer early payment discounts?)
Request a higher LOC limit from your bank
Find alternative funding

Q: How far ahead should I forecast?

A: Start with 3 months as a default. Extend to 6 months if you have seasonal patterns or are planning major expenses. The further out you look, the less certain the projections, but it's better to have an idea than to be caught by surprise.

Q: Should I pay down my LOC or keep cash for emergencies?

A: This depends on your business. A good approach is:

Keep 1-2 weeks of operating expenses in cash as a buffer
Pay down the LOC with any surplus beyond that buffer
Review this buffer amount quarterly based on your comfort level

Summary

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Remember:

Keep your current cash balance updated
Add all your income and expenses to Projection Items
Watch the Dashboard for alerts about LOC needs
Draw on your LOC just-in-time (1-2 days before you need funds)
Pay down your LOC as soon as you have surplus cash
Set up automatic interest calculations to track true borrowing costs
Review weekly and adjust as your situation changes

By following this guide, you'll minimize interest costs, avoid cash flow surprises, and make informed decisions about when to borrow and repay.

Managing Your Line of Credit: A Complete Guide