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Source: The CPA Journal
In this article a banker explains how small- or medium-size CPA firms can use lines of credit. Under a line of credit the bank makes a commitment to lend, and the firm can draw down all or portions of the line as needed. Lines of credit can be used to finance:
- Working capital
- Capital expenditures such as:
- leasehold improvements
- IT systems
- purchase of a building
- Tax payments
- A slow period in the business
- Partner investments in the firm
- Partner personal or family needs
Some banks set up separate lines for partners’ personal borrowings.
Following are some criteria to be used in selecting a bank:
- The bank should understand accounting practices.
- The bank should have experience in lending to the types of businesses with which the firm deals.
- The bank should provide good customer service.
- The amount of the line should be in the same size range as the bank’s typical loans.
- There should be a reciprocal referral relationship between the bank and the firm.
- The firm should be an important customer of the bank.
- The bank should offer other services such as equipment leasing, personal and business mortgages, cash management services, and private client services.
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From The CPA Journal, a Publication of the New York State Society of CPAs, October 2005. For the complete article, click on the following link: http://www.nysscpa.org/cpajournal/2005/1005/perspectives/p16.htm. |
