Insights

MPL General Counsel Corner – Its All About The Benjamins

June 14, 2021

Do you want to know the best time to get a loan?  When you don’t need it.  Many businesses are recovering and some are in quite good financial shape.  With the low interest rate environment, I would suggest you start a discussion with your bank or other third-party lender and try to get a line of credit.  When the economy turns, and it will at some point, a line of credit can provide a much needed safety net when a cash crunch hits.  Also, as many witnessed during the downturn of 2008-09, the access to capital can dry up quickly.

On the flip side, many companies are in hyper-growth mode, but are limited because of capital constraints.   A lot of cash is sitting on the sidelines looking for a home with the right opportunity.  If your business is in need of capital or you are thinking of changing your capital structure, what should you be preparing in advance?  Below are the top things that a business owner should be preparing:

  1. Company records –  When is the last time you looked at your operating agreement or by-laws?  Are the owners in your company records updated and correct?  Have you had a company meeting of the Board lately?
  2. Company financials – Do you have financial statements prepared?  How about your tax and payroll records?  Can you give an indication of what business will look like in 6-12 months?
  3. Amount and Use – How much do you need and what are you planning to do with the funds? Is it for a rainy day, a capital project or something else?
  4. Risks – What could go wrong with your use of the funds?  Do you fully understand the risks and what will you do if any of them occur?
  5. Providers – Who will you approach?  Commercial lenders, Private lenders, Investors, Friends, Family?

This list may seem simple, but it is easily overlooked.  If you are considering capital in any form, I would suggest you work with your professional service providers and get your books and company documents in order before you approach potential funding sources.   At the end of the day, a poor capital structure can be the downfall of your business.

As Puff Daddy famously quipped “Its all about the Benjamins”.

Here are a few other things that may be of interest:

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As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com), Erik Spurlin (espurlin@mpl-law.com) or anyone in our office with questions or comments.  

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