Brookharbor Lenders in Charleston, West Virginia passes line-of-credit requests from Kanawha County firms, clinics and restaurants to funding partners. This page covers how lines work, limits and covenants, seasonal use, the cash advance comparison and renewal.
At a glance
- Professional services
Professional, scientific and technical services, Kanawha County, WV: 428 employer establishments (CBP 2023)
- Ambulatory health care
Ambulatory health care services, Kanawha County, WV: 406 employer establishments (CBP 2023)
- Food services and drinking places
Food services and drinking places, Kanawha County, WV: 393 employer establishments (CBP 2023)
Business Lines of Credit for Charleston, WV Law Offices, Clinics and Restaurants
Business lines of credit suit businesses whose costs and income arrive at different times every month. In Kanawha County, WV that describes a large part of the employer base: professional, scientific and technical services had 428 employer establishments in 2023, ambulatory health care 406 and food services and drinking places 393 (County Business Patterns).
A law office draws on a line for filing fees and expert invoices and repays it when a matter settles. A clinic draws while claims are processed. A restaurant draws for a large supplier order and repays as the week's sales come in. In each case the line is used, repaid and used again.
Commercial Line of Credit for a Kanawha County, WV Firm: Limit, Review and Covenants
A commercial line of credit has a limit, a rate, a draw period and conditions. The limit is the most the business can have outstanding. The rate is usually variable. The draw period is how long the line stays open before it must be renewed or repaid.
Conditions, often called covenants, are promises the business makes to keep the line in good standing: providing financial statements each year, keeping a minimum balance or a ratio of income to debt payments, or not taking on other debt without consent. Read them before signing; breaking one can let the lender freeze or call the line even if payments are current.
Business Line of Credit for a Seasonal Business With a Predictable Slow Stretch
Some businesses have a slow stretch every year that they can predict: fewer patient visits in one month, fewer events in another. A line drawn during that stretch and repaid when activity returns costs interest only for the weeks it is used.
A partner reviewing a line for a business with an uneven year will want to see that pattern in the bank statements across more than one year, so the dip looks like a cycle and not a decline. Two or three years of monthly statements tell that story better than one.
Line of Credit vs. Cash Advance for a Charleston, WV Salon or Store
A salon or a store with steady card sales may be offered both a line of credit and a merchant cash advance. A line charges interest on what is drawn and can be repaid early to stop the cost. An advance collects a fixed amount from future card sales, so collecting early does not usually reduce what is owed.
The two are priced in different ways, so put both on the same page in total dollars, for the amount and period actually needed, before choosing.
How to Get a Business Line of Credit Renewed Each Year
Most lines are reviewed each year. The lender looks at updated financial statements, the account's history and whether the covenants were met. A line that was used and repaid regularly, with the balance reaching zero from time to time, shows it is being used as intended.
- Send year-end statements and tax returns on time, before the renewal date.
- Keep the line from sitting at its full limit for months at a time.
- Raise any covenant problem with the lender early, rather than at renewal.
- Ask well before the renewal date whether the limit or rate will change.
An Invented Draw-and-Repay Year for a Litigation Practice
Illustration only, invented figures: a two-attorney litigation practice in Charleston, WV has an invented $75,000 line at an invented annual rate of 12%. In this invented March it draws $30,000 for expert and deposition costs on one case.
In this invented case the balance stays at $30,000 for five months, costing about $1,500 in interest (our arithmetic, simple monthly interest at 1% a month). When the case settles in August, the firm repays the draw and the full limit is available again for the next matter.
Had the invented firm borrowed $75,000 as a term loan in March, it would have paid interest on the whole sum from the first month. Working capital loans make more sense when the need is one sum, once.
Two articles put a line beside other funding: a line compared with an advance for one kitchen and payroll draws while a second site opens.
By Brookharbor Lenders ยท Updated