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Q: Mybusiness line of credit comes up for renewal in less than a year.Everything is going great with my company, so should I approach mybanker now about renewing my loan to hedge my bets in case of anunpredictable slump?
A: Youare a rare breed! Most of my borrowers had to be dragged into thebank to renew their lines, much less do so early. Your fears arecommon; the most often-asked question I've received fromentrepreneurs has been "Will my line of credit berenewed?" You've worked yourself ragged to make yourcompany profitable, and, with one fell swoop of his pen, yourbanker can throw you into a financial tailspin. No credit, nobusiness.
Now is the time to ask yourself if your relationship with yourlender is anything other than nirvana. If problems exist, fixthem.
Take an honest look at your financial history with your lenderand the current atmosphere at the bank. If you feel your situationis favorable for renewal, remind your lender that your line matureswithin the year and make him aware of your intentions. Also,consider whether you'll need an increase in your credit linefor future working capital. Don't overlook the fact thatindustry swings occur rapidly and you may need reserve funds toweather future storms. Just be sure you can justify the need forany increases you ask for.
Your banker will probably want to see financial statements forboth the business and the principals, last year's tax returns,and a short summary of what you've done to improve your bottomline since your last credit approval. Encourage your lender tovisit your business. This is mutually beneficial: You deal from aposition of strength by delivering your loan request on your ownturf, and your lender walks away with a tangible image to factorinto that loan request. Fiscal planning for an unexpected slump cannot only allay your fears, but also boost the confidence yourbanker has in your abilities.
Doug Hood is co-founder of Rainmaker Capital Corp., a capitalacquisition consulting company in Cartersville, Georgia. Co-founderMarilea S. Hood contributed to this article. Send questions oranecdotes via e-mail to doughood@rainmakercapital.com.
