Compare where your business is now with where you want to be in two or three years.
This basic analysis will help you decide how much capital you need and whether you need a bank for some or all of these funds. The analysis will also give you some insights about structuring or restructuring your bank debt.
Here are some of the areas to consider.
* Assess your credit line. Do you need to increase your lending limit to fund growth or to take advantage of business opportunities?
* Modify your collateral or guarantee requirements. Were your collateral or personal guarantee requirements established when your financial position was not as strong as it is today? If your balance sheet is stronger, it is reasonable to request some relief.
* Convert term debt. Often, businesses grow by using their credit lines to fund capital projects and other expenditures that require a number of years to repay. Consider “terming-out” some of this debt to free up your line of credit and permit better cash flow planning.
* Convert floating interest rate debt to fixed. In an environment of rising interest rates, converting to fixed-rate debt will limit your interest rate risk.
* Consider leasing. Banks offer several leasing products that can be very advantageous. Some alternatives to consider include a leasing line of credit or a sale and lease-back. If structured appropriately, leasing can be an effective source of capital.
Source: Steve Pittman, Bruner-Cox LLP, (330) 497-2000 or [email protected]
