“Pete” owns and operates a well-established plumbing company, founded in the 1920s. Pete had about two dozen employees and was a fixture in his community and the local Chamber of Commerce. For many years, his business thrived, providing plumbing contracting services to the local public school district.

In 2008, the collapse of the real estate market caused ripple effects through the economy and local government budgets. In anticipation of lower tax collections, the school district made budget reductions and did not renew Pete’s contract.

Pete seemed genuinely caught off guard and requested an emergency line of credit from our bank so that he would not have to make layoffs. The request was denied in the loan committee. The credit officer’s response was blunt. It was time for Pete to “re-size” his business.

Pete has since done so, scaling down his operations, payroll, and facilities.

Moral of the story: Apply for a line of credit when you are doing well. In other words, get the credit line when you need it the least, so that it is available when you need it the most. Do not expect banks to throw you a lifeline because your business is losing money and customers. They are not in business to lend money that is unlikely to be paid back. Additionally, Pete got too comfortable with a large contract. Always diversify.

**NOTE: All “Bankable Stories” were written by One Click Advisor founder James Chittenden and are true stories of clients that he assisted as a business banker. Names have been changed to protect client confidentiality.