While you may have a line of credit for $100,000, written in that stack of loan document pages you may find a covenant written that either requires a certain debt to asset ratio or a minimum amount of cash that must remain in the account. Thus restricting how much of that $100,000 you actually can have access to at any given time.
Say you decide to sell an older piece of equipment hoping to free up some cash, make sure to check with your bank first to ensure that they will allow you to sell that or any piece of equipment, as it may fall under a blanket lien that was written into your loan agreement, restricted you from selling any asset without the banks permission.
It’s easy to rely on the bank during times of prosperity, but in times of crisis, when fearing for your business’ survival, understanding and making the right decisions on how to use and not use your line of credit is imperative. The best thing you can do is not tie up any of your bank lines and leave yourself room to use your lines of credit for expenses like payroll, marketing, or bridging a cash flow gap.
After reviewing your line of credit and recognizing that you could use additional resources for funds your business, American Capital Group is happy to give free consultations to discuss equipment financing options currently available for businesses during this economic uncertain time. Click here for a free consultation.
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