Sabtu, 06 April 2013

Buyer beware: choose your lenders wisely

A struggling economy and changes in lending practices in recent years made it difficult for many entrepreneurs and companies get traditional bank loans or equity lines of credit. The good news is that times are changing. While they cannot return the days get money easily, banks are beginning to ease as the economy recovers. In other words, if you need an infusion of cash, not everything can be lost. Actually, not necessarily at the mercy of banks. You have more power than you might think, when it comes to finding and selecting a lender.

A strong relationship with the banks or lenders that we work with is essential for the long-term success of your business. But just like any other relationship, you need to make sure it’s a good match, before agreeing to play or work together. Do your homework. Conduct interviews. Check references. Listen to your gut. So Choose wisely and carefully structured things.

Remember that this is your business and livelihood, and while it may not always feel like it, you’re in the driver’s seat. As a driver, keep in mind a few rules and guidelines to live:

1. communication is key

Know better than your spouse lender. Just like a marriage, the lines of communication are essential. Lender can and will help you out of a sticky situation if you communicate. Once you stop communicating, a lender is likely to become defensive and you lose any chance to work out of a bad situation cashflow.

2. Understand the type of loan you need

Keep in mind that the needs are different from wants. We recommend a credit line of $ 1 million dollars, but it may not be what you need. Don’t take on more debt that can manage your business.

Match the long-term debt with long-term activities. This means don’t buy one piece of equipment or real estate with a line of credit. These are long-term activities and should be financed by a long term loan. If you use the line of credit (i.e., short-term working capital) inefficiently, you won’t have the funds available to meet payroll commitments or vendor.

3. don’t put all your loans in one place

If you have more than one loan with a lender, chances are that the loan documents have cross default language. Cross default means that a lender will tie together your loans. Cross default is a clause in a loan agreement or other debt obligation stating that the borrower default if he/she is in default on any other obligation. For example, a cross-default provision can indicate that a person defaults in its car lease if he defaults on his mortgage. This provision exists to protect the lender.

Your job is to protect themselves. To do this, intelligent planning. If you have a line of credit from a lender, so be sure to guarantee a housing loan to another.

Get cash to grow your business is like driving down the road. You can control your car but you have to take wise decisions to make at your destination. There will be a lot of bumps in the road and you don’t know always what is lying ahead but if you browse correctly then arrive safely. Choose your partner wisely and navigate your way with your lender carefully as you would a winding road along the coastline of California. Enjoy the ride!

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