Here's this month's newsletter in the Business Management series that will take you through aspects of managing (business, financial, jobs, labor) giving you insights and techniques to help you build a better business.

The following content is extracted from Mike Holt's Business Management Skills Workbook.

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

You will find that there are times when a requirement for operating funds comes up suddenly, maybe for new equipment, or to finance a large contract. As most businesses do not have the amount of financial capital necessary for daily operations as well as to fund needed growth, you need to have established a source of external credit. 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 (usually 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.

We'd love to hear from you about this series, and the ways you're using it. Send us your comments and feedback by clicking on Post a Comment below. Look out for the next part in this series a month from now, and please share with your colleagues.

This content is extracted from Mike Holt's Business Management Skills book.
To review or catch up on previous newsletters on Management and Business click here.