A revolving line of credit can come in very handy for seasonal inventory purchases and other needs, but every one to five years, the line of credit needs to be renewed. Renewing the line of credit that frequently allows the financial institution and your business to make sure that type of credit is the best fit for your business.
Here are five tips to help you ensure your line of credit gets renewed.
Start Early
The most important thing you can do is start early. Not being in a rush can make a world of difference.
Try to schedule a meeting with your lender about 60 days before your line of credit is up for renewal. Before you meet with your lender, you’ll need to get a lot of information organized and review it. Having all the paperwork ready before the meeting will ensure it goes smoothly.
Do Your Homework
Gather all your year-end financials, and prepare a statement that compares your business’s performance this year with last year. Then review your commitment letter to the financial institution that holds your line of credit. Go through it and check to make sure you met all the terms and conditions. If you didn’t meet any of the commitments, have a response ready about what happened and why it won’t happen again.
Look Ahead
Once you’ve got a clear picture of your current and past financials, review your business plan and update it for next year. Make sure you have very specific details about how your company plans to deal with different aspects of the changing economy, such as the falling gas prices or the rising shipping costs that affect your business.
The day of the meeting, relax. By doing the legwork in advance, you’ll be prepared to handle all of your lender’s questions. You’ll also be able to ask them which way they are leaning, and they should be able to give you a pretty accurate answer.
Return Calls ASAP
After the meeting, try to return your lender’s phone calls as quickly as you can. Sometimes the problem is a lack of information, or the lender just needs verification of one detail. It’s important for them to have the most up-to-date and accurate numbers, and quickly verifying that a number is right can save you a headache later.
If All Else Fails …
Lastly, if your line of credit was not renewed, don’t be afraid to ask why. In some cases, you might be able to make small changes and reapply.
In the worst-case scenario, starting so early gives you plenty of time to check with other financial institutions and shop around for the best rate.
If your lender isn’t interested in meeting or getting to know your business, it could be a sign that your line of credit won’t be renewed. The same is true if they refer you to a special department or division. These red flags shouldn’t go unheeded. It never hurts to start checking in with other financial institutions so you have a back-up plan just in case.
These tips aren’t a guarantee of success, but they can make a big difference not only in your renewal but also in your overall experience.
