The Importance of Closing with a Line of Credit for Business Financing

A line of credit is crucial for businesses with working capital needs, especially seasonal or inventory-dependent ones. Closing a deal without securing a line of credit complicates future financing options; existing lenders will often block new lenders from entering due to their senior position in the capital structure. If a business is identified as needing a substantial line of credit, it's vital to align with SBA lenders capable of offering such financing during the closing phase. This prevents the scenario where a business realizes post-close that they require capital but face difficulties obtaining it because the existing lender controls the assets. It's advisable to attempt to close with an undrawn line of credit even if the immediate need isn't evident, as acquiring one later becomes exceedingly challenging. Accurate working capital analysis is necessary to communicate financing needs effectively to lenders, making it essential to approach lenders experienced in lines of credit from the start.