Managing Lines of Credit

The Western Massachusetts Enterprise Fund is considering establishing a Line
of Credit loan product. Are their any list member organizations that have
such a product? We are interested in how you have structured the line and how
you managed the record keeping, especially dealing with fluctuating balances.
Also are their any good computer programs for tracking line of credit
lending. Our current system does not deal with computing daily interest.
Thanks

Richard Shortt
Senior Loan Officer


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On the capitalization side, I'd like to know how CDFIs deal with banks which offer lines of credit instead of loans or equity investments. Are lines of credit bad as a way to capitalize CDFIs?
-Dan Holland
Mon Valley Initiative
Homestead, PA


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We at Northern Cal Community Loan Fund have a line of credit product that
helps nonprofits with cash flow needs due to reliance on government
contracts, which are on a cost reimbursement basis. We only have a few --
they are working well. We don't have a sophisticated software program to
manage them yet. I would love to tell you more about it in a week or so --
too busy right now! I will continue this after the holiday, or pass your
inquiry along to staff here who actually deal with the record-keeping. I
think it is a product that is very much needed.
Happy holidays -- Mary Rogier, President, NCCLF, San Francisco

At 09:29 AM 12/16/1999 EST, RichShortt@Aol.com wrote:
>The Western Massachusetts Enterprise Fund is considering establishing a Line
>of Credit loan product. Are their any list member organizations that have
>such a product? We are interested in how you have structured the line and
how
>you managed the record keeping, especially dealing with fluctuating
balances.
>Also are their any good computer programs for tracking line of credit
>lending. Our current system does not deal with computing daily interest.
>Thanks
>
> Richard Shortt
> Senior Loan Officer
>
>


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Don't forget that your problems with recordkeeping could be dwarfed by
your own liquidity and money management problems if you offer true lines
of credit to many customers. You need to be able to meet the demand for
the combined totals of your lines all times, even if the customers
choose not to draw down. Since you don't have access to the Fed, unless
you do have some sort of access to sufficient liqidity, that's an
expensive proposition.

There are, of course, lots of mitigating considerations, depending on
the specific circumstances of your own funding sources and of your
customers' product needs. Draw downs under non-profit's contract
financing tends to be more like stepped term loans than true grid lines,
for instance, so it's easier to plan for and administer. And you can
always limit the amount and timing of draw downs. But then those
products are not really true lines.


RichShortt@aol.com wrote:
>
> The Western Massachusetts Enterprise Fund is considering establishing a Line
> of Credit loan product. Are their any list member organizations that have
> such a product? We are interested in how you have structured the line and how
> you managed the record keeping, especially dealing with fluctuating balances.
> Also are their any good computer programs for tracking line of credit
> lending. Our current system does not deal with computing daily interest.
> Thanks
>
> Richard Shortt
> Senior Loan Officer


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