Do You Need a Line of Credit?
by Pete Zeiser
Cash is king. For small business owners, access to reliable sources of liquidity is important, particularly during times of uncertainty. It provides capacity to weather downturns as well as flexibility to take swift advantage of opportunities as they surface. Having ample cash on hand is ideal. However, it is not always efficient to carry large cash balances or realistic to suddenly stockpile a significant liquidity position.
Having access to a revolving line of credit that can be accessed and paid back over and over can be an important part of a business’s liquidity arsenal. Lines of credit come in various forms, some secured by business assets such as accounts receivable and inventory and others by real estate or even equipment.
If you don’t have a line of credit, ask your banker what the institution can offer you. Make sure you take note of the interest rate, any origination or non-usage fees, as well as how much your lender is willing to advance on different types of collateral. If you already have a line of credit, be sure to inquire about renewal terms ahead of the maturity date to avoid surprises.
Have your financials and business plan in order before meeting with your banker. That way, he or she has a clear understanding of your business’s needs and can provide you with the right financial tools to access cash when you need it.
Answers provided by Pete Zeiser, President - Chesterfield Commercial at Midwest BankCentre. He can be reached at 314-633-6762 or pzeiser@midwestbankcentre.com.