Access to cash when you need it most
A line of credit has long been used as a financing and growth strategy for small businesses. Any entrepreneur will tell you that keeping your business company afloat and growing it is all about cash flow. With a secured, accessible credit line, you have what you need to pay creditors, employees and keep your doors open, regardless of your cash position. whether or not your business bank account is in the red.
As a member-owned credit union, TDECU offers business owners the credit line choices and flexible financing options you'd expect from a large bank, along with the quality service and personal attention you deserve.
Business Line of Credit = Total Flexibility
You decide how to use the funds in your Business Line of Credit, including:
- Access to cash quickly and easily for any business need
- Purchase inventory or materials for your business
- Working capital
- Seasonal business fluctuations
If you’re a small business owner, be sure you have a business line of credit at your disposal. Nothing can be more important for covering cash flow issues and for taking advantage of unexpected business opportunities and expanding your business.
Securing a business line of credit
How to prepare your loan request
As a small business owner, you know everything there is about running your business, but you may feel a bit confused or intimidated by approaching your banker about borrowing money. At TDECU we want to put you at ease, prepare you for this conversation and give you some idea of how bankers make credit decisions. Before approaching any lender, you should carefully evaluate your financing needs. While the lender will make an assessment of their own in analyzing your loan request, you are responsible for identifying the amount of money needed for specific purposes.
How to quantify your financing needs
As the small business owner and borrower, you are responsible for identifying the amount of money needed for specific purposes. Generally, the needs of your business will fall into two broad categories:
- Expansion Capital – Used to finance business growth
- Working Capital – Used to finance short term business cash needs
The first category is considered a permanent investment in the business, which means funds will be repaid to the lender over a period of time greater than one year. Working capital can be of a seasonal nature and repayable in less than one year according to the seasonal sales and cash flow patterns of your company. Permanent working capital may be a requirement, especially if your goal is to commit funds to a permanent buildup in working assets (accounts receivable and inventory) in support of sales growth, introduction of new product lines, or territorial expansion.
How much should you borrow?
Determination of the loan amount may be a straight-forward process, especially when the loan will be used to finance assets which can be readily quantified, such as land, buildings or equipment. If your business needs working capital or funds to build inventory, accurately pinpointing the amount you need to borrow can be a greater challenge. Talk with an experienced TDECU lender today. We can refer you to a reputable third-party advisor who can assist you with this decision. In either case, even if your business has a successful performance history, it is important to develop projected financial scenarios (preferably with help of a Certified Public Accountant) to justify the amount you seek to borrow. A good rule of thumb is to prepare balance sheets, income statements (at least 2 years) and cash flow projections (monthly for one year). The lender will want to carefully evaluate your historical performance as well as projections.