This page from Tealford Business Capital in Houma, Louisiana explains business lines of credit for Terrebonne Parish, Louisiana firms: how a revolving limit works, commercial lines secured by receivables or stock, requirements partners read, draw and repayment periods, lines sized around uneven months, and a worked example of a contractor's draw.
At a glance
- Construction employers, Terrebonne Parish, LA
202 (County Business Patterns 2023)
- Retail employers
435 (County Business Patterns 2023)
- Wholesale trade employers
182 (County Business Patterns 2023)
Business Lines of Credit in Houma, LA: Revolving and Non-Revolving Limits
Business lines of credit come in two broad forms. A revolving line reopens as it is paid down, so the same limit can fund wages this month and a supplier order next month. A non-revolving line can be drawn up to its limit once and is then paid off. Both charge interest on the drawn balance only, which is the main difference from a term loan.
Terrebonne Parish, LA had 202 construction employers, 435 retail employers and 182 wholesale employers in 2023 (County Business Patterns 2023). All three pay suppliers or crews before customers pay them, the timing a line is built for.
Commercial Line of Credit: Secured by Receivables, Stock or Nothing
A commercial line of credit is a business line by another name, and it can be larger and secured. An asset-based line is sized from receivables or inventory and rises or falls with them. An unsecured line rests on deposits, credit and time in business, with a personal guarantee from the owners in many cases.
- Annual rate and how it is set, fixed or tied to an index.
- Draw fees charged each time money is taken.
- Annual or maintenance fees charged whether or not the line is used.
- Inactivity fees on lines left unused.
- Renewal terms: how often the partner reviews the line.
Business Line of Credit Requirements: Deposits, Credit and a Borrowing Base
Requirements belong to each partner, but the same few items come up on nearly every line request. Time in business and deposits show how steady revenue has been. Credit history shows how the owners have handled earlier debt. For an asset-based line, an aging report of receivables or an inventory listing sets the borrowing base.
A line can be reviewed and reduced, so partners also look at whether the business will use it as intended: drawing for timing gaps and paying down when cash comes in, rather than carrying a full balance month after month. A balance that never comes down is better served by a term loan.
How Does a Business Line of Credit Work When a Contractor Draws?
- The partner approves a limit and sets the rate and fees.
- The business draws part of the limit when a bill falls due.
- Interest accrues daily on the drawn amount only.
- Payments reduce the balance and reopen that much of the limit.
- At renewal, the partner reviews the account and the business's records.
Illustration only, invented figures: a Houma, LA electrical contractor with an invented $90,000 limit draws $28,000 for wire and wages and pays it back 35 days later when the general contractor pays. At an invented 11.75% annual rate, that draw's interest comes to roughly $315 (our arithmetic); the full limit is open again afterward.
Seasonal Line of Credit Questions: Paying Down After a Heavy Stretch
Some businesses earn unevenly through the year: a retailer that stocks up ahead of a sale event, a contractor whose work follows a builder's schedule, a supplier whose large customers order in waves. A line suits them because the draws can follow the uneven pattern, and paydowns follow the cash.
The key is the paydown plan. Before drawing, write down which sales or payments will clear the draw and when. A partner reading the request looks for that pattern in past bank statements, so a business with a few years of deposits showing the cycle has the strongest case.
What Is a Draw Period on a Line of Credit, and When Does Repayment Begin?
Some lines have a draw period, a set number of months or years when the business can draw, followed by a repayment period when it can no longer draw and pays the balance down on a schedule. Others revolve with no end date until renewal. During a draw period, payments can be interest-only. Illustration only, invented figures: an interest-only payment on a $40,000 drawn balance at an invented 11.75% annual rate is about $392 a month (our arithmetic), with none of the principal going down.
Read the line agreement for the length of the draw period, what payments look like in each period, and what triggers a change, such as a missed payment or a drop in the borrowing base.
A Line of Credit Request for Stock Bought Ahead: The Paperwork
- Business bank statements for recent months.
- Business and personal tax returns.
- Receivables aging report, for lines sized from receivables.
- Inventory listing, for lines sized from stock.
- A short note on how draws will be paid down.
Retail, construction and boutique pages show how each trade draws on a line; working capital loans and term loans suit one-time needs.
Related reading: a working capital loan explained step by step, with a revolving line beside it, when a shop draws on a line instead of financing a welder and why a lease payment and a line draw are read differently.
By Tealford Business Capital ยท Updated