State Board Nail Tech Practice Exam 2026 – Comprehensive Prep Resource

A reserve of cash provided by a bank for a salon to use is referred to as a line of credit because it allows the salon to borrow funds up to a certain limit whenever needed, offering flexibility in managing cash flow. This arrangement is particularly beneficial for businesses that may experience fluctuating income or unexpected expenses, as it ensures they have access to funds without needing to apply for a new loan each time they require cash.

In this context, a line of credit can be utilized for various operational costs or emergency expenses, making it a practical financial management tool for salons. Unlike a loan, which usually has a fixed amount and repayment terms, a line of credit permits the borrower to withdraw funds as needed and only pay interest on the funds used, giving it a more dynamic application for business financing.