With current interest rates what they are, my wife and I decided to go for a mortgage refi on our primary mortgage from a 30 to a 15 year note. The process has been quite a bit more tedious than the last time we did this complicated by the fact that I started my business last year after being at a salaried job for 3 years prior. We got approved last week finally and were planning on signing all the papers this week. My business has a line of credit that is collateralled by our home. Yesterday I got a call from an underling at the bank saying that my business LOC has been frozen!! Turns out the LOC should have never been given in the first place and the person who gave it to us is no longer with the bank, complicating things further. After many not so pleasant phone calls on my part I finally got to somebody who spoke to me like a person not a number on a balance sheet. Here's the thing. The bank would have never even known that there was an issue had we not gone for the refi. Moral of the story:
Be very careful in this new financial scenario. If you have an LOC either personal or business that is tied to your property, the bank will scrutinize this to the nth degree. I just heard another story of a landscaper who uses his LOC during the lean winter months to get him through who just had his not only frozen, but taken away completely leaving him with very few options to make ends meet this winter.
Fortunately for us we do a lot of business at this bank and are good customers. The bank is back peddling big time trying to keep us and it looks like all will work out in the end.
I also have a LOC that is tied to my house and I use it for exactly this purpose, to cover the short term (waiting for checks) and this has been my thought and why I have not gone after any of the "refi" offers that seem to be flooding in. Thanks for sharing and I hope this resolves on the positive for you!
Best of luck!
FrostLine Productions, LLC
Everyone has a story to tell.
Seems like anything to do with banks these days can easily escalate into a nightmare.
In the past I have considered a LOC tied to my house as well... I've always been reluctant to do so, wanting to keep my personal financial world and my corporate financial worlds from colliding. It would seem that was the right decision.
I just bought a new house, my second such purchase.
Fifteen years ago when I bought my first house I had to do little more than sign my name. I had a crappy job, low income, zero credit history, and no assets. Yet they were happy to hand me the keys practically on a handshake.
Earlier this year, it was a nightmare. I have a good job, am well paid, am principal owner of a quasi-successful company for 12 years, have great credit history, zero debt, own a house that's paid for, and semi-respectable net worth. Yet it was still like pulling teeth to get the house financed. They "just-one-more-thing"ed me to death, and it took weeks and weeks.
And this was with a bank that is a client of our company (we produce all their television commercials), and whose president is a personal friend.
I can imagine if I had been a stranger.
It's getting harder.
Fantastic Plastic Entertainment, Inc.
We had a 15 plus year relationship with one of the nation's largest banks (let's just call them Skank of Amerika) because they had bought the bank who had bought the local bank where we originally opened our accounts. Knowing that our line was coming up for renewal in May I started asking them if everything would be OK and business as usual when it came time for renewal. I asked this the moment I had our corporate tax return in hand and sent to them in late February.
"Oh, of course everything will be fine," I was assured. "Why you're one of our best customers. We'll just have to go through some formalities when it comes time to renew."
Not being the sit back and wait type, I began to shop around for a new bank... just in case.
Jump ahead to a month before the line comes due and lo and behold the "private banking" officer who had been in charge of our account calls to say that the Skank was being re-organized and that her job had been eliminated. "But don't worry. I'm sure someone will be contacting you... (say it with me) REAL SOON."
Two weeks to go before the line would expire and come due in its entirety, a telemarketing clerk from the Skank called to say that they were FedEx-ing me renewal papers and would need them back quickly to prevent any "interruptions in service." What I had to wait for the papers to learn was that our prime plus a quarter of a percent rate was being raised to prime plus one and a half to two percent (variable at their option) and that there was now an annual fee of $500 -- for the favor they were granting us of having the line of credit.
I called the "clerk" and asked how it was that I had been told for months everything would be fine, only for this to suddenly be sprung on me. Her answer was something along the lines of "We have had to change our policies for some of the riskier parts of our loan portfolio..." and basically "that's the deal, take it or leave it." Being as polite as I could I pointed out our history with the Skank, never having missed a payment, bounced a check, or having any problems whatsoever for 15 years in addition to having a pretty healthy tax return and accounting firm-prepared annual statement. "Well, be that as it may, that's still our new policy."
"Do you read any financial publications," I asked the clerk. "Why?" she asked. "Because I've been reading where one of us lost over 120 BILLION last year and IT WASN'T US!" That was literally followed by 20 or more seconds of silence. Then "Well, the rates and the fees are still our new policy with small businesses."
I changed banks within days. Now the rate on our line is three quarters of a percent over prime and the annual fee is $100. Not the deal we had, but far better than the one offered by the Skank with a gun to my head.
Lines are a good thing to have when you want to be able to stay current with your own vendors and not live hand to mouth in down times. So if we're a healthy business why have I been carrying and slowly paying down a large balance on our line of credit?Funny you should ask. It's because the investment arm of a large New England-based bank a few years back had bought one of our clients and, after a year of operating them, determined that it would be better for the bank to put the company into bankruptcy, thereby stiffing the company's vendors and letting them "liquidate" the company's healthy pension fund. That put us into a $120,000 hole, for which we were able to offset some what we owed to others on behalf of this client by dipping deeply into our line of credit. And here's the truly amusing part (he typed, gritting his teeth) the New England bank was later bought by the Skank so we were, in essence, screwed by our own bank -- the same one who held the sizable balance on the note.
Like I said, I changed banks but I have little trust in the financial sector. 2008 has shown most of them to be pond scum.
Nick's post makes me sad, for two reasons.
Firstly his "I have little trust in the financial sector" observation, which I completely share. Even though our biggest, best, fastest-paying, most fun, most willing-to-take-a-gamble and most lets-turn-these-creative-guys-loose-and-see-what-they-can-do client is..... a credit union (actualy, these are great folks, couldn't ask for better).
Secondly... my brand-new mortgage has just been purchased by his "Skank" friends. Aaaarrrgggh.
Fantastic Plastic Entertainment, Inc.
[Todd Terry] "Firstly his "I have little trust in the financial sector" observation, which I completely share. Even though our biggest, best, fastest-paying, most fun, most willing-to-take-a-gamble and most lets-turn-these-creative-guys-loose-and-see-what-they-can-do client is..... a credit union (actualy, these are great folks, couldn't ask for better)."
We moved all of our business, both our personal and business accounts, loans, mortgage, etc., to a local credit union.
We couldn't be happier.
They treat us like kings and queens and during one trip, the branch manager saw Kathlyn standing in line and he came up and told her that he knew she was really busy and that he would help her so that she could get back to the office. When she mentioned that she had to go to drop some FedEX stuff before going back, he followed her out to the car and took the packages and made the run for her, saying that he had to drop some packages himself -- so why not.
Our local credit union is rated the highest rating they can get. They are rock solid, are not making the kinds of crazy loans that the banks made, are sitting flush with money to loan to solid endeavors and because of that, they do not treat you like a pariah.
I could go on but both Kathlyn and I will never go back to any of the major Skanks, thank you.
Consider us sold on the superiority of credit unions.
(who also hates the Skank of Amerika)
Just to be up-front about it, "Skank of America" was Bill Maher's term (or one of his writer's). He also had a great name that rhymed with the name of another of the too big to fail, "Sh*ttyBank."
And fresh off something circulating in email recently,
"The economy is so bad that if the bank returns your check marked ‘Insufficient Funds,’ you call them and ask if they meant you or them."