Bankers, Line of Credit

Invest the time necessary to find a good banker and develop a close working relationship, and then stick with them even if they move to another lender. If you have a problem locating a banker to work with, ask your accountant, attorney, stockbroker, or any other respected advisor in the financial field to recommend a banker and to arrange an introduction. In order to be successful, you can't allow a small-thinking attitude to inhibit your financial growth, even if it requires securing loans to grow.

You will find that there are times when a requirement for operating funds comes up suddenly, may-be for new equipment, or to finance a large contract. As most businesses do not have the amount of financial capital necessary for daily operations as well as to fund needed growth, you need to have established a source of external credit. Credit can be obtained from either short-term (high-rate credit cards) or more formal and less costly long-term arrangements, such as working capital-type lines of credit.

A line of credit is an agreement between your firm (typically you individually) and a financial institution (such as your local bank) that agrees to provide a specific amount of money that will be available when needed during the agreement’s term (usually one or more years). Establishing a line of credit is essential since you cannot run a business without adequate funds. The cost and ease of obtaining credit is based on experience and confidence. Even if you don’t need extra cash in the early stages, establish a pattern of borrowing money in increasingly larger amounts. Make payments on time to establish the lender’s confidence in you.

A line of credit usually requires a personal guarantee. It’s no longer easy to find a credit line based solely on a corporate guarantee. Always review with your attorney the potential risk to your personal assets in the event of default on all loans.

When securing a loan, consider borrowing against your receivables if this option is available to you. Given the propensity for mergers among lenders, after you’ve built up a proven track record, spread your financial business to perhaps two additional sources of capital.

The above content is extracted from Mike Holt's Business Management Skills program.

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Mike Holt is an author, businessman, educator, speaker, publisher and National Electrical Code? expert. He has written hundreds of electrical training books and articles, founded three successful businesses, and has taught thousands of electrical code seminars across the US and internationally. His company, Mike Holt Enterprises, has been serving the electrical industry for over 40 years, creating and publishing books, DVDs, online training and curriculum support for electrical trainers, students, organizations, and electrical professionals. 

Mike has devoted his career to studying and understanding the National Electrical Code and finding the easiest, most direct way to share that knowledge with others. He has taught over 1,000 classes on over 40 different electrical-related subjects to tens of thousands of students. His knowledge of the subject matter, coupled with his dynamic and animated teaching style, has made him sought after from companies like Generac, IAEI, IBEW, ICBO, NECA, and Fortune 500 companies such as IBM, Boeing, Motorola, and AT&T. He is a contributing Editor for Electrical Construction and Maintenance Magazine (EC&M) and formerly Construction Editor to Electrical Design and Installation Magazine (EDI). His articles have been seen in CEE News, Electrical Contractor (EC) International Association of Electrical Inspectors (IAEI News), The Electrical Distributor (TED) and Power Quality Magazine (PQ).