CHICAGO — Sporadic cash flow cycles can be the bane of a small company’s existence. So Florida National Banks of Florida in Jacksonville is offering an alternative loan program designed to skirt that particular problem.
The business-purpose revolving line of credit, which was introduced last month by Florida National, serves the bank’s target market — those businesses with annual sales of between $1 million to $5 million, said Joyce Indingaro, vice president of the bank’s corporate and institutional division.
The credit line, which can range from $25,000 to $1 million, allows small corporate customers to borrow at will, as the funds are needed. Unlike the more traditional term loan, monthly payments are made only on the interest, with principal repaid as it suits the borrower. This arrangement, Ms. Indingaro said, eliminates the problem of a cash squeeze for those customers who have highly cyclical or seasonal businesses.
In addition, the revolving line of credit uses the customer’s equity in his house or office building as collateral for the loans. A real-estate-based loan is more secure and consequently allows additional borrowings, Mr. Indingaro said. And for a new, small company, she said, it may be the only type of collateral the borrower has.
The borrowing is check-activated. At the end of five years, the loan can either be renewed or paid-off.
The credit line, Ms. Indingaro said, is part of Florida National Bank’s strategy to “aggressively go after small businesses in Florida,” as well as the professional market, such as doctors and dentists. There are 22,000 companies — excluding the professionals — in the state of Florida with have annual sales of between $1 million to $5 million.
The program is also open to businesses with sales of less than $1 million a year — a market which Ms. Indingaro said “Florida National very much wants to serve.” She estimated that there are approximately 250,000 companies in Florida with annual sales of less than $1 million.
The price of the loans, Ms. Indingaro said, is prime plus an increment that is guided by the business’ total relationship with the bank. A singular relationship will almost always result in lower pricing than a business which is served by more than one bank.
The program, she said, is a boon not only to customers, but to Florida National’s commercial lending officers who will not be saddled with as much paperwork and documentation.
“From a marketing standpoint,” she said, “if it’s good for the customer, it’s good for us.”