Conventional Line of Credit

Commercial lines of credit can be a great way to float seasonal expenses and take advantage of inventory discounts. Lenders expect the proceeds of these lines of credit to revolve annually. It is best to have a $0 balance for at least 2 weeks out of each calendar year. This will tell the bankers you are using the funds on temporary expenses that will be repaid within a rolling 12 month period.

It is important to have your conventional line of credit perform well because they are only committed for 1 year. Each year you will have origination fees and a review to determine whether or not a lender will grant a continued extension of credit. Don’t be afraid to use the line of credit. Lenders like to see you borrow and pay off the line of credit. Avoid late payments, over the limit drafts and carrying balances from one year to the next.

With the recent change in legislation for SBA, lenders have been inclined to underwrite all lines of credit with the SBA guarantee. This may or may not apply to your specific case. SBA allows for a 2 year commitment on lines of credit but have a cap on the dollar amount of the line. Normally lenders do not monitor SBA guaranteed lines; however, monitoring is typically a result of how large the line of credit is.

Related Posts

Comments are closed.

business loan clients