During growth phases, many businesses experience capital shortfalls due many factors. It could be from unforeseen operating expenses, uneven cash flow cycles, inventory shortfalls, or when an unexpected opportunity arises. In many cases, the need for a cash infusion is only temporary. Therefore, it may not make sense to seek long-term financing with a loan. Instead, the business’ specific cash needs may best be served with a line of credit. However, business lines of credit come with certain tax implications that should be fully understood to optimize its benefits while avoiding possible IRS traps.