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[Discussion] Small Business (Construction): Do we need to continue to use our line of credit to have a good relationship with our bank?

November 05, 2020 at 02:18AM

In short, we have a line of credit of $1.5M. Current rate is at 4.25%.

I took over this business approx. 5 years ago that was in pretty bad shape. It had a $900,000 balance in its Line of Credit in addition to sizable loans elsewhere. As of 2 months ago, we've managed to pay off all major debts and liabilities, and currently the only debt of any significance is $100,000 in our primary bank's line of credit.

I'm being counseled by my managers (most of whom are engineers) that we should retain our $100,000 balance to maintain a good relationship with the bank.

We're trying to become more efficient in every department. We're even reviewing our office kitchen inventory, reviewing service agreements with our ISP, phone, certification companies to reduce even a few $100 here or there. I'm about to sign the renewal papers for the LOC and I'm thinking… $380/month payment is virtually nothing, but doesn't that mean it's less than nothing for the bank?

How would this maintain a good relationship?

I also want to request an increase in the future. Would they then say, "well, your finances look good, but you barely use this LOC, and you want an increase? Why?" Is that how this even works?

We're all overthinking everything right now clearly.

Any industry insight would be great.

Thank you

submitted by /u/velders01
[link] [comments] via Savings, Checkings, CDs, oh my!

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