Business owner worried about losing line of credit

October 13 12:05:01 PM, LA Times

Dear Karen: I'm concerned that my business line of credit will be reduced or revoked. Do you have any advice?

Dear Karen: I'm concerned that my business line of credit will be reduced or revoked. Do you have any advice?

Answer: Talk to your banker about your loan. If your debt is based on home equity and your house has lost value recently, your fears may be justified. But if your company is thriving and you have a good payment history, you should be OK.

You can also shore up sales and reduce expenses so your firm is not so dependent on credit, said Gregg Landers, a director at CBIZ Accounting Tax & Advisory Services in San Diego. "Contact your customers and ask how you can help them," he said. Look for new product and market opportunities as your customers' needs change.

On the expense side, keep your inventory lean and weed out unprofitable customers. "Make sure sales and operations have daily or weekly communication," Landers said. "Every company has customers that cost more than they add to the bottom line. Identify them, evaluate how to make them profitable customers, and if that's not possible politely hand them to your competition."

Launching an import business

Dear Karen: I have 12 years' experience exporting handicrafts from the Philippines. I'm now settled here, married to a Southern Californian. How do I restart my business?

Answer: First, find out whether there's a viable market for your products. Can you realistically sell enough to cover inventory and shipping, not to mention overhead, sales and marketing, and still deliver a profit?

If your initial investigations are positive, "determine the logistics process needed to get the goods to the U.S. -- whether it be containers, boxes, air delivery or drop shipment -- and then determine the customs process, fees and other items needed," said Daniel Morales, director at the Small Business Development Center of the San Gabriel Valley.

Once you've determined fixed expenses -- don't forget insurance and taxes -- come up with a pricing structure and then determine your ideal clients and distribution channels, Morales said.

Getting clients to pay promptly

Dear Karen: Some of my best customers have gotten lazy about paying. How do I boost my cash flow?

Answer: In tough times, slow payers sometimes become "no-payers" -- something you can't afford. Make sure your billing supervisor is accurately tracking invoices and diligently pursuing out-of-date receivables.

Send out bills immediately upon completion of projects and don't take on new jobs for clients who have outstanding balances, said Mike McDerment, chief executive of FreshBooks, an online billing service. Bill frequently, he said: "A constant reminder of a payment due will increase your chances of actually receiving it."

If you can, charge an upfront retainer that will give you a cushion while you are working on a job.

Automatically send out late payment reminders that inform you and your clients about late accounts, and give your clients several easy options for submitting their payments.

"Confirm that all bills reflect the current balance and are sent to the right party. Customers are more likely to avoid payment of inaccurate bills," McDerment said.

Got a question about running or starting a small enterprise? E-mail it to ke.klein@ latimes.com or mail it to In Box, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012.





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