Permanent Capital Loan

Many borrowers ask for the wrong loan when they pursue commercial credit. The best way to know what type of financing is most appropriate for your request is to start with the borrowing cause. This is the root reason or need for capital. Once we understand the borrowing cause it becomes much easier to source the right credit source for the borrower.

I have been asked for a line of credit on many occasions when the borrowers really needed a Permanent Capital Injection. This can be one of the most tricky borrowing causes to identify. The big questions borrowers must answer is, when does working capital turn into permanent capital? How much working capital has or will be turning into permanent capital?

Being able to identify when working capital turns permanent is critical to projecting growth and operation cash flow needs.When a borrower fails to recognize that working capital is becoming permanent they will typically not have enough cash for payroll or inventory purchases. Forecasting this need can be very difficult as it is often tied to sales growth. This is why a crystal ball would be so valuable.

These are advanced concepts in financing, budgeting and forecasting. If you would like to go over your borrowing needs specifically, call us today for a free consultation.

 

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