Beretta Only: How Lines of Credit Work with Arizona Commercial Loans

Sunday, October 14, 2018

How Lines of Credit Work with Arizona Commercial Loans

Commercial lines of credit are very popular with the small business financing of today—and are the most misunderstood. Here, then, are some of the basic facts that can help you decide if this type of Arizona Commercial Loan is right for your small business.
A line of credit allows a company to draw on a predetermined amount of money. To access the funds, the company just needs to draw on the line. Every time you draw on the line, you are reducing the amount of funds you can draw from. The inverse is that you can pay down the line of credit at any time, thus increasing the available funds to draw from. A conventional credit card works much like a revolving line of credit.
When getting the Arizona line of credit, the bank restricts the use of the funds. Since it is a Arizona commercial loan, the funds can only be used for business purposes. Your company can use these funds to cover short term needs such as paying suppliers, covering payroll, and other corporate expenses.
Just like all types of lines of credit, there is an associated cost. The costs vary depending on the size and risk of the line, and the fees are based on the outstanding balance. There are additional fees such as availability and maintenance fees. These fees vary by bank. Most banks require that the full balance of the line of credit be paid down in full once a year.
Lines of Credit: Secured and Unsecured
Secured Lines
Both corporate and personal collateral can be used for this type of line of credit. These assets will be used to secure the repayment of the line of credit. If the business owner defaults, the bank will foreclose on the assets to pay off the loan. Various types of assets can be used such as account receivables, inventory, cash, machinery, securities, certificates of deposits and real estate. The pleaded assets will be secured by the bank filing a UCC.
Unsecured Lines
This type of line of credit does not required collateral such as outlined above. The unsecured line of credit will be personally guaranteed by the business and often includes a personal guarantee by the business owner. In the case of a default, the bank will sue the business owner personally as well as the company.
When applying for a Arizona commercial loan, the bank will examine the company’s income statement (P & L and Balance Sheets). These reports will help the bank determine if you can repay the loan.
Most banks will want to review two years of financial reports. The bank wants to see two years of operating profits. The bank also wants to see assets on the balance sheet such as accounts receivable, machinery, inventory and real estate. This requirement varies by bank. The line of credit based on these assets runs around 50% of the net value of the asset such as the machinery after depreciation.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.