Would you accept this business line of credit from RBC?

As long as paying the $325 a year is not a burden I would take the line of credit.
I'm assuming this is a corporation because if it's just self-propriotor you should just inquire about a personal line of credit which usually doesn't have monthly fees.

The thing about borrowing is banks will approve you when they see you working (by monitoring account activity) but they will not approve you when you don't have work.
Get the LOC while you qualify because when you need the money due to a lack of work the bank will deny you.

I don't think in business lending, building up a credit score matters as much as it would for personal borrowing. It's more about your business' ability to pay it back. Having an established LOC would only slightly boost the future limit.

I agree with BuySellBuy and would take it. It is a trifling sum and your corporation doesn't need it, but you could look at it as a replacement for any float you have in your business current account. You could reduce your float by $15K of real money. Your float is just stranded cash so now you would unlock some of it. Because you'd only use the LOC when something unusual happens that you would normally draw on your float. The $375 annual expense is just another "cost of doing business" I've spent that much on dumber things every year.

I don't think it will change your creditworthiness at RBC so don't bother drawing the funds out of the LOC. I do think it will be an entry point on fees for increasing the LOC limit over time. The bank fees and interest rate will always favour the bank so they are meaningless, but you can never have enough credit available before you need it

You guys are awesome. Thank you, both of you.

Just to be clear. What I should be doing is accepting the LOC but I don't need to use that LOC unless I need it because using the LOC doesn't improve my business' credit worthiness by much. Is that right?

correct

Yes.

However, it would be interesting to hear dissenting views and the reasoning behind their choice.

Thank you

I would not. 15K is very little for a business, interest rate sucks and paying 375 per year for nothing at all just make it unappealing. I have tons of ways to borrow that much money personally on better terms. I'd do that if my business was so strapped for cash.

slavka012 wrote: ↑I would not. 15K is very little for a business, interest rate sucks and paying 375 per year for nothing at all just make it unappealing. I have tons of ways to borrow that much money personally on better terms. I'd do that if my business was so strapped for cash.

Where do you find your ways of borrowing money?

HELOC, unsecured LOC, even 1% CC offers.

slavka012 wrote: ↑ HELOC, unsecured LOC, even 1% CC offers.

Agreed. Those are cheaper ways if the intent was to simply access some cash for operations. I guess I was reading more into OP's question than was really stated. My mistake was assuming OP really wasn't interested in getting the cash, nor even the financial cost of it. Instead I thought he was trying to leverage the ability of his corp to access its own cash now and in the future. My personal biases come out because I'm trying to extricate my personal connections to "my" corp so it can be owned & operated by someone else. That is a prerequisite for profitably selling or retiring from your business.

Just Confused wrote: ↑ My personal biases come out because I'm trying to extricate my personal connections to "my" corp so it can be owned & operated by someone else. That is a prerequisite for profitably selling or retiring from your business.

Good goals to aim for. Then again 15K is a chump change. I just don't see a successful business that is worth selling (or buying) in a position where it's operation could be crippled by lack of 15K credit. If they were offering a 200K LOC, then I'd say sure go for it, years from now you might need it. A start up however is more likely to be in such situation, and then there is nothing wrong with using personal credit.

pkpower wrote: ↑ You guys are awesome. Thank you, both of you.

Just to be clear. What I should be doing is accepting the LOC but I don't need to use that LOC unless I need it because using the LOC doesn't improve my business' credit worthiness by much. Is that right?

Unless you plan to use it why bother paying fees when you could get a personal loc with no fees? Which by the way my tangerine LOC is 4.95%, RBC started mine at 5.8 but slowly keeps raising it over the years and is now at 7.8%

Ive never been offered a "business" line of credit but I do don't do my business stuff through RBC either. I do have a personal LOC with them though.

I mean i dont see the difference but others have given their opinion. For me my question is do you see a need for this specifc LOC to pay that much per year?

I wonder if the fees can be written off.

I know everyone's different but for me I take 40% of every $ I make and reinvest it in my business. Although small, I've never needed to borrow.

I was offered a personal LOC a couple of days before. Way better terms and no fees! Took that instead