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small business loan

Is your line of credit next in your bank’s line of fire? …TBHR offers some precautionary tips for businesses with lines of credit.

March 30, 2009 //  by admin

William Rodgers
William Rodgers

BOSTON, MASS.

 

Business owners take out lines of credit for any number of reasons – to finance operations, fund the start-up of special projects, buy equipment, embark on an advertising campaign or even to act as a rainy day fund.

In today’s turbulent economic climate, there have been cases of banks calling business owners’ lines of credit without advance notice and, in many instances, without apparent justification. As counsel to many businesses as part of its corporate law practice, Boston-based Tarlow Breed Hart & Rodgers, P.C. has some pointers for business owners with on-demand lines of credit.  

“With the way things are today, it’s quite possible that a bank could call in a customer’s line of credit at any given time. While that might be unrelated to anything the borrower has or hasn’t done, business owners can put themselves on better ground with lenders,” said Bill Rodgers, a member of TBHR.

For starters, Rodgers suggests that businesses should, at all times, maintain compliance with the terms of the line of credit and the loan requirements. That not only means making payments on time, but also keeping up with timely reporting and observing all covenants of the loan.

“You also want to keep an open line of communication with your lender. If you’re experiencing some difficulty or if there’s a development at your business that could affect your line of credit, tell the bank sooner rather than later.  Banks do not like surprises, particularly in challenging economic times. By communicating forthrightly and regularly, you build goodwill that could save your line of credit down the road,” said Rodgers.

“The sad reality is that there are times the bank’s decision to call your line of credit has nothing to do with your performance as a customer and is a reflection of what’s going on internally with the lender or externally in the customer’s industry,” said Rodgers. “That’s why having a contingency plan in place before the bank calls your line of credit is critical.”

Of course, doing your due diligence on a lender prior to taking out a line of credit can also better insulate business owners from having a banker make a surprise demand for payment of a line of credit. Some guidelines business owners can follow in selecting a lender include:

●        Seeking out lenders who have an appetite for your industry  (e.g. a lender who specializes in loans for construction companies is less likely to get jittery by turns in the real estate market).

●        Seeking the counsel of financial intermediaries – working with somebody who knows the landscape and speaks the language of lenders can help prevent you from making a critical mistake. They can also tell you which institutions are giving out lines of credit at the moment.

●        Looking to community banks – it was the larger banks that were hit hardest by the recent economic downturn.

●        Being sure to have your own house in order – including having up to date financial statements and a current business plan in place.

“The current economic landscape has everybody—businesses and lenders—a little anxious.  By doing your homework first and by proactively working with your lender, you can better protect your business against the unwelcome payment demand when you’ve got no way to pay,” said Rodgers.

About Tarlow, Breed, Hart & Rodgers, P.C.:

Formed in 1991, Tarlow, Breed, Hart & Rodgers, P.C. is committed to providing high quality, comprehensive legal services to its clients.  Featuring a breadth and depth of experience and perspective usually found only at larger law firms, Tarlow, Breed, Hart & Rodgers. P.C. offers sophisticated legal counsel to entrepreneurs, businesses, individuals, families, and institutions.

Tarlow, Breed, Hart & Rodgers’ areas of expertise include corporate law and business transactions, litigation and dispute resolution, estate planning, taxation, real estate, municipal law, and hospitality law.

The offices of Tarlow, Breed, Hart & Rodgers, P.C. are located at 101 Huntington Avenue, Prudential Center, in Boston, MA 02199. For additional information, or to arrange for a consultation, please call 1-617-218-2000, e-mail info@tbhr-law.com, or visit www.tbhr-law.com.

Is your line of credit next in your bank’s line of fire? …TBHR offers some precautionary tips for businesses with lines of credit.Read More

Category: Client NewsTag: line of credit, small business loan

Why you can’t bank on consolidating your loans.

January 20, 2009 //  by admin

MIDDLEBOROUGH, MASSACHUSETTS…

In tough economic times, many small businesses are looking to consolidate loans and credit card payments. While taking out a single line of credit and consolidating other debts might sound like a good strategy in theory, it puts all your debt with one lender. According to Itamar Chalif, president of Atlantic Capital Solutions, it’s a strategy that can backfire in a major way.

Atlantic Capital Solutions, based in Middleboro, Massachusetts, helps small businesses across the country find funding and lines of credit to buy or lease equipment, expand, or make other improvements. Often times, those businesses turn to ACS after a bad experience with a lender. In a number of cases, those lenders have been institutions the business had used for years.

Says Chalif, “We’ve heard some pretty horrible stories recently. One involved a business owner who had already made 24 payments on a $52,000 loan when he inquired if he could rewrite the loan to take advantage of lower interests rates. The bank offered to rewrite the loan if he put $5,500 towards the principle. The business owner declined and thought nothing more of it. The next day, he received an e-mail from the bank requesting the balance of his loan, $14,000, be paid off upon receipt. This was after the lender drew $20,000 out of his personal and business accounts. [after 24 payments, the balance on the loan was $37,000]. Adding insult to injury, he had to pay late fees on all the checks that were written and bounced because he did not know the bank depleted his accounts until it was too late.”

Adds Chalif, “Another story that’s equally disturbing involves a business owner who had been in business for more than 20 years, with total annual sales exceeding $3 million. He had excellent credit, excellent cash flow and a great net worth. For the past six years he had a $250,000 unsecured line of credit with a local bank. One day his banker invited him in and said ‘you are one of our best clients, you have been paying your loan on time, you cycle over $3 million a year through our bank and we really appreciate your business. However you have two choices: (1) provide us with collateral of $250,000 or (2) pay off your line of credit.’ The bank wasn’t completely cold-hearted. It did give him 45 days to pay off the line of credit.”

Tales like these aren’t designed to keep people from seeking lines of credit. Far from it. Says Chalif, “The idea is to diversify so that if you should somehow fall prey to one of these lenders, it doesn’t wipe out your bank accounts or, worse, put you out of business.”

To that end, ACS offers small businesses a number of solutions to getting financing and lines of credit, including:

●        New and used equipment leasing/financing

●        Small Business Administration (SBA) options

●        Non SBA solutions for start-up businesses

●        Commercial mortgages

●        Terminal Rental Adjustment Clause (TRAC) leases

●        Lines of credit

●        Working capital loans

●        Business acquisitions

●        Factoring (accounts receivable funding)

Offering professional, one-on-one service, ACS helps small businesses sift through the fine print that goes along with many financing options so that the best interest of the business owner is protected.

Based in Middleboro, Massachusetts, ACS works with clients locally and nationally, including:

●        Business owners, controllers, CFOs and other decision-makers.

●        Entrepreneurs contemplating the purchase of a business, franchise or start-up.

●        Equipment vendors

For more information about Atlantic Capital Solutions, Inc. and its range of services, you can visit http://www.AtlanticCapitalSolutions.com or call 508-718-5520 to set up a complimentary initial consultation.

About Atlantic Capital Solutions

Atlantic Capital Solutions has helped business owners, entrepreneurs, CFOs and other decision-makers find the right financing option for their organization. ACS works with a broad spectrum of lenders and institutions and is therefore able to offer a variety of customized programs for its clients, including: new and used equipment leasing/financing; commercial mortgages; Terminal Rental Adjustment Clause (TRAC) leases; lines of credit; working capital loans; business acquisitions; and more. For more information about Atlantic Capital Solutions and its range of services, you can visit http://www.AtlanticCapitalSolutions.com or call 508-718-5520 to set up a complimentary initial consultation.

Why you can’t bank on consolidating your loans.Read More

Category: Client NewsTag: debt consolidation, line of credit, small business loan

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