Business and Finance

Posts Tagged ‘Line’

When applying for a credit facility, you will most likely be required to have a well written business plan to showcase what you intend to do with the business loc. This may not be the case if you are using a home equity line of credit secured by your personal residence. If you are seeking to obtain a standard business line of credit then you will most certainly be required to have a business plan. BusinessLOC.com has a sample business plan outline that you can use to develop a plan that showcases how you intend to use the debt proceeds.

The key to a good business plan is to have a 25 to 45 page summary of your business, how you intend to use the capital sought, a description of the product/service you a selling, and a three year financial model that showcases you previous and anticipated profit and loss statements, cash flow analysis, balance sheet, and breakeven analysis. Again, these tools have been included for free by BusinessLOC.com.

If you are having significant trouble with writing your business plan then you may want to consider hiring a professional firm to assist you in this process. Often, business planning firms have extensive relationships with banks, finance companies, and private lenders that will be interested in your business project or established company. These firms may or may not take a success fee if they are able to secure a business loc for you. Prior to working with a business planning firm, you should check the credentials of the individual producing your business plan, make sure that they are registered with the Better Business Bureau, and that they have an established track record of obtaining credit facilities through their produced business plans.  Read more... (294 words, estimated 1:11 mins reading time)

Outside of obtaining the necessary financing that you need in order to launch or support your business operations, your business LOC also assists in establishing a credit profile for your corporation. As your business expands, you may need to acquire additional credit facilities or loans in the future. Much like a personal credit report, your corporation also develops a credit report. However, the credit reports related to business operations are typically provided by a company called Dunn and Bradstreet. By establishing a credit profile for your business, you will be able to expand your credit acquisition capacity over time. The mechanics of a business credit report versus that of a personal credit report are almost identical.

By establishing a business LOC, you also assist with developing an ongoing relationship with your banking or financial institution. Again, it is important to remember that banks want you business. Banks want to lend to you. Banks also want you to hold your deposits. By selecting a bank that can provide you with all of the necessary tools that you need to conduct business, you will become a valued customer. This is especially true if you conduct ongoing borrowing activities with the bank as this is their most profitable revenue center. Outside of fees, banks typically do not generate substantial income from managing money market accounts or checking accounts.

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Although not the most common method of acquiring startup capital, using a business LOC as financing to launch your business venture is not uncommon. As we have discussed in previous articles, there are a number of different method of financing your new business venture including using your own capital, raising money from private investors, or taking out a lump sum business loan.

However, using a business line of credit gives you more control over your business development. If you intend to build your business over a period of time then it may be to your advantage to use a business LOC versus as business loan. This allows you to only draw down the funds as needed, and you will only be required to pay interest on the portion of principal that you have drawn down. Although many new entrepreneurs seek to acquire all of the funds that they need via a traditional business loan, the flexibility of a business line of credit is often overlooked. When developing your business plan, you should entertain the concept of using a term based credit line rather than a business loan. Again, your accountant or financial advisor can assist you in making the proper determination of whether or not using a line of credit is more appropriate than a standard lump sum based credit facility.

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Much like a real estate brokerage, a loan brokerage can assist you in securing a business line of credit. These firms, much like any other type of brokerage, receive a fee for securing a business LOC on your behalf. However, like any industry, there are some unscrupulous people that work in this industry. It is important to note that you should avoid any loan brokerage that requires excessive fees before attempting to secure credit for your business. While it is not unreasonable to have some upfront fees before providing you with this service, you should always know how these fees will be used in conjunction with securing you with a business line of credit. When dealing with a loan brokerage you should make sure that any upfront fees are for acquiring credit reports or producing a business plan that will be used to show to banks and finance companies. Additionally, you should always verify the legitimacy of a loan brokerage by checking not only with your local Better Business Bureau but also with your state’s banking/finance regulatory agency. Please note that not every state requires that loan brokerage firms carry a specific license in order to render this service.

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As discussed in our previous article, we discussed the usage of a business loan and how you ultimately repay your lender for providing you with lump sum financing. In this article, we are going to focus on the mechanics of using a business line of credit. This was touched on previous in our first article that showcased the pros and cons of using a business line of credit versus a traditional business loan.

Again, a business line of credit operates very similarly to that of a large credit card. You are often provided with checks from which to draw down the principal. With a business LOC you are typically only required to pay interest on the outstanding principal balance due. Business lines of credit operate on a finite timeline, and more likely than not, you will be required to make regular principal payments or the LOC will convert to a standard loan after the term of the credit facility is complete.

As such, you can calculate your anticipated payments at the close of the credit facility term. This can be simply done by knowing what the interest rate will be on the outstanding principal balance. BusinessLOC.com has developed an expansive number of MS Excel spreadsheets that you can use to determine the monthly payment that you will owe on the credit line (a monthly basis), as well as what the payments will be if the credit line is converted to a standard business loan at the end of the facility’s term. As always, if you should have any questions regarding the mechanics of a business line of credit or any other type of business credit facility then you should consult with a certified public accountant or business advisor to assist you in this process.