Opening a business line of credit can put you in a better position to act quicker when certain business opportunities come up, launch key marketing campaigns, manage cash flow more efficiently, and perform other things like upgrading your computer systems. Many times, just knowing that you have an additional cash resource can make you rest easier.
An ideal way to establish good credit regarding your business is to open a line of credit with the people you do business with on a regular basis. The majority of vendor transactions require payment on delivery or point-of-sale payment. But, if you can establish a solid working relationship with your vendors, you can open a line of credit and thereby simplify your cash flow.
Get Familiar with Your Contacts
If you're requesting a company line of credit, everything will go much smoother by providing all the pertinent information upfront to the vendor. The first step is to figure out which credit manager you should contact. In general, the account manager who's in charge of offering you the pricing and product information can probably give you the name of the appropriate credit manager. Fully disclose all the necessary information in the letter so everyone is on the same page. Also, you can do a quick search on the Internet to find the company and then call them to ask for the credit manager's name and contact information. Addressing the person by name is important so your letter doesn't end up in the trash with other junk mail.
Providing all the necessary information is step one to establishing credit with other businesses. For bigger lines of credit, the vendor may ask that you provide more personal financial information including a balance sheet or income statement, although it's not part of an actual request for an initial line of credit. Stick to the basic line of credit agreement by making sure your payments are always on time. If you anticipate doing more business with a certain vendor, inform your credit representative so they can review and potentially increase your line of credit. This process shouldn't be intimidating. Credit departments understand the importance of new business and will work with you to ensure that both product and cash flow will transition as smoothly as possible for a win-win situation for everyone.
How to Outline Your Request Letter
• Opening Introduction
If you're requesting business credit, it's best to send an actual letter to the credit manager of the company. Start out your letter by saying that you want to open a credit line with their company. Describe your business including what you do along with how much you value the many products and/or services the vendor offers. If necessary, describe how long you've been doing business with them and how much money you've actually spent on their products. Let them know that you intend to keep doing business with them in the future. Keep to the facts and be as brief as possible since credit managers are very busy people.
• Make Your Request
Request a credit line that's comparable to the amount of cash you generally spend on a semi-annual or quarterly basis with the company. Also, specify how much time you need to repay the money (60, 90, or 120 days) and point out that you're willing to work with a lesser amount of credit and a tighter payment schedule until you eventually establish a solid payment history. It's important to not appear as if you're begging, but to clearly express your flexibility in terms of your requirements along with your desire to build a long-lasting working relationship so you can both benefit in the end.
• Personal Information
Be sure to include the legal name of your company, address, phone, and email address. List your banking information if applicable concerning any other lines of credit you've already established as well. The primary goal of the letter is to present yourself and your company in a professional light.
#1 - Business Line of Credit Request Letter
Mr. John Smith
443 Sunny Lane
Piedmont, California 91034
Dear Mr. John Smith,
My company and I are extremely pleased with the overall service and performance of your business in terms of machine and fabrication work and we are looking forward to doing business with you for many years to come. Therefore, it would be much more convenient for us to establish a line of credit with you and would be honored if you would do the majority of our auto shop services.
Our machine shop services typically run about $1,000 a month. Our regular machinist just retired and we currently need a dependable quality service that can provide us the necessary credit. You can easily review our good credit standing by contacting any car supplier in the area. Furthermore, we are more than happy to fill out an application for credit in order to speed up the process if you like.
Thank you for your time and we are looking forward to hearing from you very soon so we can both take our business to a whole new level.
(sign your name here)
William Colby Services
778 North Lane
Piedmont, California 91034
By Andre Bradley