This is a new series and category that addresses the deadly details of making sure that all your efforts in creating business and balance do not come to naught due to the necessaries of life left undone ~ necessaries like money, legalities, insurance, administrivia. Attention to these tactics allows your power to work in the world, and lets you set and maintain your boundaries.
Let’s look at one of the necessaries of money that are not often discussed with early stage entrepreneurs: bank loans and lines of credit.
My father taught me never to have debt. Then, early on in my career, an entrepreneur taught me a different twist on this: get loans or lines of credit when you don’t need them. That’s right, go to the bank once your business has some track record of revenues, and take out a 90-day small business loan, or a business line of credit.
Make it a small amount, easily achieved and explained, say, for business or marketing one-time expenses or a small equipment purchase (not equipment expensive enough to require a separate equipment loan). Use a small part of it. Otherwise, sit on it. Pay the little bit of interest that is due, and the administrative fees to set it up. Then pay it back in full in 30 days or 60 days, well before its due date. Wait 6-8 months, repeat the loan or extend the line. Use it (or some of it), and repay. After the first year, do this every 12-18 months. Always take small loans or lines, but each a bit larger than the last.Do this particularly in the first quarter of the year if your corporate tax returns are strong, so the bank records your tax information with the loan. The bank will want three years of returns if you have had the business that long.
Why use these tactics? Because in this way you establish that your business has both a track record and an excellent credit history with your bank. Then, when you need the money, your direct credit history with your bank will come into play and you will get the loan even if your current statements look weaker than before.
If possible, befriend your local bank manager (unless he or she rotates among the branches), or establish a relationship with the regional or corporate manager at networking events.
Do not wait long after your business is producing revenue, either to establish this credit history, or to apply for a line of credit, especially if bad times are approaching. If you wait until the bad times have arrived, you will find the bank cautious about creditors, and not so likely to grant the loan. If you have had a good year, but suspect a weaker year coming, move to secure your line or loan with your current (strong) financial records.
These tactics are particularly important in states (like California) in which banks are not friendly to business. In Boston, my bank manager was my colleague and processed certain paperwork over the phone without needing my signature until I could come by. In California, I could not find a bank manager who understood what I meant when I wanted to establish a “relationship” with them before transferring my corporate account into the bank from out of state. Find out about your state and your local banks, and which are most accessible to your kind of business, then take the necessary steps. Move quickly to take out a new line of credit based on your history, even if it seems you will not need it.