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0 Replies Last post: Dec 3, 2008 3:45 AM by Rick Tillman

Changing presidents of a company line of credit concerns

Aug 18, 2008 7:47 PM

Click to view diymee's profile Start-up diymee 2 posts since
Aug 18, 2008
A company is incorporated, the president of the corporation has between 100-200k line of credit for the company. The company uses the line of credit only to float bills for inventory but is paid off in full every month. Is the line of credit on the credit of the company since its a corporation or is it on the credit of the current president?

My concern is when the current president steps out of the picture will the company still be able to have these lines of credit if the new president of the company doesn't have as great of credit as the current president?
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Click to view LUCKIEST's profile SCORE LUCKIEST 7,942 posts since
Aug 6, 2007
1. Re: Changing presidents of a company line of credit concerns Aug 18, 2008 8:48 PM
in response to: diymee
Changing presidents of a company, Welcome

Tell us more. Who are you?? What is your position at title in this company.

If you are a V P, I have one answer for you

Does the company have a Controller?? Treasurer?? Accountant?? Lawyer??

Who name is on the Credit card?? LUCKIEST
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Click to view Milleisen's profile Mogul Milleisen 129 posts since
Aug 6, 2008
2. Re: Changing presidents of a company line of credit concerns Aug 19, 2008 9:21 AM
in response to: diymee

It depends who is named as the borrower, and who is the guarantor. Typically the corp will be the borrower, and the principals (anyone with over 20% interest in the corp) will guaranty. In your case, you need to find out if the line is non-recourse, meaning that there are no personal guarantees.

Even if you discover that it is non-recourse, many loan documents have a MAC clause (stands for Material Adverse Change) which says that the bank has the right to call the loan and prohibit further advances if there is a signifant change to the company. Losing the president would probably be a valid reason to invoke a MAC clause.

If there is a new president, the bank may want to meet him, see a resume, and will require a PFS (personal financial statement) and run their credit if they are going to be the new guarantor.

I hope that helps!
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Click to view diymee's profile Start-up diymee 2 posts since
Aug 18, 2008
3. Re: Changing presidents of a company line of credit concerns Aug 19, 2008 6:31 PM
in response to: Milleisen
It is a small business, the only officers of the company are the president and vp. There are no loans only credit cards. The name on the credit cards have the company name on them with the individuals name below them. Can a MAC clause apply to any type of loan document including credit cards? The credit cards with the biggest limits are the held with the bank that has the companys checking account. I believe the line is non-recourse. I apparently have some question to investigate the matter further though.

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