Credit Line for sole proprietor

saphireFebruary 18, 2007

A friend who is a professional and has his own business is moving his office and needs a substantial loan. While he is ok he is no expert in finance. The BankFirst the bank he has used for the last 10 years was offering a below prime rate promotion for a business credit line in December. He applied before the application deadline but did not get some of his financial statements in until after the deadline. Not sure what happened but in January they told him he may be too late for that program but they would see what they could do. His credit is excellent and so his record with Bank X.

A month later he gets a bill for $500 for his new credit line at prime plus 1! He does not really want this, he does not need the credit line, just using it as a cash management tool. Personally in his situation he would be better off with a term loan.

As it turns out BankSecond in his area is looking for new accounts and is offereing a promotion of 5.9 on a term loan or 6.9 on a cerdit line

Does anyone think that if he contacts BankFirst, his bank, and mentions the promotion at BankSecond that they will match it? Or should he simply close out the BankFirst credit line and move his business to BankSecond? This would be a minor inconvenience but well worth the interest rate difference

Any thoughts on the following proposed letter

Dear BankFirst loan office,

I was rather surprised to get a bill for a credit line. Please be advised this is the first contact I have received to tell me that I was approved or the terms under which I was approved. Please be further advised that when I applied in December it was for your below prime promotion. I was never told there was an annual fee involved. I cannot refer to the paperwork since I was never provided with a copy.

I am rather surprised that after 13 years of banking with your bank that I could not receive a better rate or terms. Attached is a flyer from XXXX Bank. As you can see this provides for a rather attractive interest rate. Is this something your bank is able to compete with?

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If he has bothered to get to know the branch manager and build a relationship yes.

Otherwise, no harm in trying.

    Bookmark   February 18, 2007 at 10:12PM
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I wouldn't write a letter.

I'd pay a visit to the bank, asking for an explanantion, and mentioning the other bank's offer, then asking whether they might consider altering their proposed terms.

Some years ago I had a tax-deferred retirement account(Registered Retirement Savings Plan) with one stockbroker, at no annual admin. fee, supposedly because my account was larger than a certain amount. When I told my broker there that I thought that my account hadn't quite met the required level, he told me to leave well enough alone.

Later that company was bought out by another, then later a third, and my no-admin. fee exemption was carried along throughout.

Then near the date when I had to change the plan into a no-further-deposit and a required-annual-payout fund (Registered Retirement Income Fund), the brokerage told me at the time of the transfer that there'd be an annual fee of something like $125.00.

I objected, saying that this plan was a continuation of the one that I'd had with them for years. My objection fell on deaf ears.

I contacted a manager of investment funds, and a trust company, to be told that they'd manage such a fund at no fee.

I told my carrier of the other companies' offers, not feeling it necessary to inform them that I'd be unenthused about using those other companies' plans. My old grandmother used to say that one should tell the truth - but that it wasn't necessary to blab, telling all that one knew.

They allowed as how they could match the other companies' offer - so I've had my retirement income fund, paying me a few thousand annually, with no admin. fee for about nine years.

Not a scratch of it on paper.

Good wishes to your friend for achieving his desires in this matter.

ole joyful

    Bookmark   February 19, 2007 at 11:45PM
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Thank you

As it turns out they did waive their annual fee (which he had never been told about in the first place) and we may go ahead and apply at the other bank. This way each bank gives him half of what he needs

They refused to lower the rate through the branch but I think after I apply at the other bank I will write a letter at First Bank to their customer service to try to get the rate lowered

    Bookmark   March 16, 2007 at 1:45AM
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