Credit Line, or Revolving Line of Credit
Definition:
A line of credit is an amount of money that a bank loans to a business for continuing cash flow needs. Typically, this amount is placed in an account at the bank and the business draws on the total amount when needed to pay bills, that is, for working capital.
A bank usually charges more for a credit line than for a fixed term loan, but you only pay interest on the amount you have taken out and not paid back.
Credit lines may be unsecured loans, as opposed to mortgages and term loans, which are secured. Some credit lines are secured by home equity; these are often called HELOC (Home Equity Line of Credit) loans.
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Credit lines may also be called "overdraft lines," because they are used to fund overdrafts from business cash flow.
Also Known As: Home Equity Line of Credit (HELOC) because credit lines are often secured by second mortgages or home equity.
Examples: The business received a $100,000 line of credit for working capital needs. The amount was placed in a bank account and the business took out money as needed, only paying interest on the amounts taken out.
A line of credit is an amount of money that a bank loans to a business for continuing cash flow needs. Typically, this amount is placed in an account at the bank and the business draws on the total amount when needed to pay bills, that is, for working capital.
A bank usually charges more for a credit line than for a fixed term loan, but you only pay interest on the amount you have taken out and not paid back.
Credit lines may be unsecured loans, as opposed to mortgages and term loans, which are secured. Some credit lines are secured by home equity; these are often called HELOC (Home Equity Line of Credit) loans.
\
Credit lines may also be called "overdraft lines," because they are used to fund overdrafts from business cash flow.
Also Known As: Home Equity Line of Credit (HELOC) because credit lines are often secured by second mortgages or home equity.
Examples: The business received a $100,000 line of credit for working capital needs. The amount was placed in a bank account and the business took out money as needed, only paying interest on the amounts taken out.
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