This is the 40th of a series of newsletters published on Business Management and Management Skills. Not all topics will apply to your business, but each section will be beneficial to establish company goals and objectives. By reading and studying these newsletter articles, you’re taking the first step in achieving your goals.

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Invest the time necessary to find a good banker and develop a close working relationship, and then stick with them should they move to another lender. If you have a problem locating a banker you can work with, ask your accountant, attorney, stockbroker, or other respected advisors to recommend a banker and to arrange an introduction. In order to be successful, you must not allow a small thinking attitude to inhibit your financial growth, even if it requires securing loans to grow.

On occasion, a requirement for operating funds comes up suddenly, perhaps for new equipment, or to finance a large contract. As most businesses do not have the amount of financial capital necessary for daily operations and to fund needed growth, a source of external credit must be established. Credit can be obtained from either short term (high-rate credit cards) or more formal and less costly long-term arrangements, such as working capital-type lines of credit.

A line of credit is an agreement between your firm (typically you individually) and a financial institution (such as your local bank) that agrees to provide a specific amount of money that will be available when needed during the agreement’s term (typically one or more years). Establishing a line of credit is essential since you cannot run a business without adequate funds. The cost and ease of obtaining credit is based on experience and confidence. Even if you don’t need extra cash in the early stages, establish a pattern of borrowing money in increasingly larger amounts. Make payments on time to establish the lender’s confidence in you.

A line of credit usually requires a personal guarantee. It’s no longer easy to find a credit line based solely on a corporate guarantee. Always review with your attorney the potential risk to your personal assets in the event of default on all loans.

When securing a loan, consider borrowing against your receivables if this option is available to you. Given the propensity for mergers among lenders, after you’ve built up a proven track record, spread your financial business to perhaps two additional sources of capital.

Mike Holt’s Comment: I would like to extend a special thank you to L.W. Brittian, a Mechanical & Electrical Instructor in Lott, Texas, for reviewing and editing the various articles in these newsletters. His comments and suggestions have been invaluable in the preparation of my Business Management and Management Skills’ Workbook. This newsletter article was extracted from that workbook. Watch for our next newsletter, and as always, we invite your comments and feedback. Send us your real-life experiences. We value your opinions and participation. Please respond to And… be sure to visit Mike Holt’s Website at

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