Jerome, ID Business Loan Questions on Credit Line Reviews, Supplier Discounts and Credit Checks

How long a line runs before review is set in each partner's offer; the agreement states the review date. At review, the partner may renew the line at the same limit, change the limit or rate, or close it to new draws.

What a partner may look at when a line comes up for review:

• How often the line was drawn and paid back down
• Whether payments arrived on time
• Deposits and sales since the line opened
• New debts the business has taken on

In an invented case, a Jerome, ID sign and print shop gets a $9,370 bill for vinyl and ink, with 2% off if it pays in 10 days and the full amount due at 30 days. Taking the discount means paying an invented $9,182.60 on day 10, $187.40 less, from a credit line draw at a 14.88% annual rate, then paying the draw back on day 30, when the full bill would have been due.

With interest figured daily, the invented 20-day draw costs $74.87, so the shop keeps $112.53 of the discount in this invented case. The margin shrinks the longer the draw stays out: at this invented rate the interest uses up the whole $187.40 once the draw runs about 50 days, so the discount comes out ahead only if the draw is repaid before then.

A partner may run a soft credit check, a hard one or both, at different points in its review; which kind, and when, is the partner's choice. Several requests sent out at once can mean several checks, so it pays to know who will run one before the file goes out.

• Ask which kind of check a partner will run before consenting
• Keep a note of which partners received the request
• Check the owner's personal reports beforehand so errors can be fixed early

A business can carry both: the equipment loan pays for one machine on a fixed schedule while the line covers costs that come and go. The partner reviewing the second request may see the first one's payments and any lien filed against the business's assets.

A broad lien from the first agreement can make a second partner cautious, so read what the first contract secures before asking for more.

In an invented case, a Jerome, ID food maker draws $7,140 on a credit line at a 15.36% annual rate to pay a packaging machine repair bill. With interest figured daily on the drawn balance, it pays an invented $3,500 back after 21 days, when a distributor's check clears, and the remaining $3,640 after 17 more days. Daily interest on the invented balance adds $63.10 before the first paydown and $26.04 after it, $89.14 across the 38 days.

Had the whole $7,140 stayed drawn until day 38, this invented draw would have run up $114.18 of interest; paying part back early trims $25.04 from that in this invented case. Keeping the draw record beside the repair invoice also shows, when the line comes up for review, what the draw paid for and when it came back.