More and more small business are having their line of credit terminated. Many of these are in the form of a line of credit on their homes; the lenders are terminating the lines of credit because, according to them, the home has dropped in value. What doesn’t seem to matter is the fact that the line of credit has been in use for many years and has always been current. A good credit score does not help; all the personal relationships that used to be found in the banking business has disappeared. The big banks are “fat ” and don’t want to lend their money.
The following are several thoughts that I have:
- Establish a relationship with a small bank; perhaps with only one or two locations in your town. There you can talk, in person, with an officer or even the president, instead of communicating with an overseas servicing company that speaks only “broken” English.
- Consider raising working capital from your management team or even your employees. They know the most about your business and by investing in your company they can share in future profits and at the same time protect their jobs. With an investment in the company they work for, they will be a lot more interested in the success of the firm and it will show in their work.
- If you have a support group, they know you well and may establish a “loan pool” where they lend money to their members and receive a better interest rate then they could get at a bank.
- Family members , and friends, can also be a source of working capital. You provide documentation as to your business finances and growth trends. When borrowing money from your support group, family or friends, always treat it as serious as a bank loan and draw up loan documents with the terms and conditions of the loan.
These are a few of my thoughts, please send me your thoughts and comments on financing sources and I will pass them on.
“It’s one of the most beautiful compensations of this life that no man can sincerely try to help another without helping himself… Serve and thou shall be served” Ralph Waldo Emerson
Have a great day!