To maintain competitiveness, organizations need a long-term investment. To raise additional resources due to overdraft of the trust loan or line of credit. About the nature and terms of this service, you will learn from this article.
Credit line is granted the organization the right to use borrowed funds of the Bank within the stipulated period of time and in the prescribed amount. Specific conditions written in the contract. This service allows you to eliminate financial gaps, not withdrawing capital from circulation. The client can independently choose when and how much money he use.
Non-revolving credit line granted by tranches within the period and spending limit. The borrower chooses when to use the money. The repayment of the debt does not increase the limit.
- Revolving line of credit is a loan that is provided by parts within the limits specified in the contract. Timely repaid the debts increases the limit of available funds. The customer pays only for the actual amount of used capital. In the first case, the borrower shall repay Bank loan and interest, after which the line closed. And the second after repayment of the first tranche of the limit of available funds increases, and can be used again the borrowed money. There is only one limitation – the loan must be repaid within a certain period of time. Most often it is 3 months.
- Non-revolving credit line with a disbursement limit applies if the customer need the borrowed funds for a certain period. But the exact start date of the expenses is not known.
- Framework credit line offers to pay for deliveries which are carried out at regular intervals, within a set period of time.
There is a separate program, under which a new loan can be obtained only after full payment of the previous within a set time period several times. It’s called the revolutionary line of credit.
There are several specific types:
- call (the return of the tools allows you to get future loan for that amount);
- contract (the loan is granted automatically after repayment of the previous);
- multi-currency (short-term financing of foreign trade operations);
- on demand (loan issued on request) and others.
The advantages of a legal person
- Save time: no need to execute each transaction separately.
- Interest is charged only on the funds used.
- The repayment happens automatically when you transfer money from contractors at the expense of the borrower.
- The interest rate for the service is lower than for the targeted loans.
- With a loan the client can increase working capital, cover unforeseen expenses or to send money for business development.
Banks becomes unprofitable to provide kreditnye lines to legal entities. This is evidenced by the judicial practice with bankrupt clients. Such claims are regarded in the same way as for conventional loans. The amount of funds that must return to the client is calculated not from the limit of the loan and the gross amount of payments. Bankers consider this product as one-time and renewable. As a result, the expenses of credit institutions increased greatly.
Option for individuals
Citizens can also obtain the credit line, but provide this service, not all banks and only bail. As the latter is used outdoor Deposit. The purpose is to Finance a loan to another Bank or obtaining working capital to start the business. However, this service has the advantages of:
- the ability to use the borrowed funds without breaking your Deposit and interest thereon;
- to make a service possible in an emergency, using as collateral a Deposit of a natural person;
- the loan is granted in the form of Bank account opening;
- minimum package of documents;
- the cost of registration provision is not available;
- interest rate is usually equal to that provided for under the Deposit subject to a small margin;
- monthly fees;
- the maximum period is six months.
There is another example of a renewable “credit card”. Funds can be received at any time, and to repay them with grace. This may also include education loans, housing construction, when the money comes in tranches, and it is possible to save on interest.
The credit line is a new kind of financing businesses. Loan capital is given for a specified period. Funds can be used when they are needed. Interest is charged only on the used amount. The rate can be fixed, floating or individual for each tranche. The credit line of the savings Bank depending on the capital requirement can be provided without collateral and guarantees. Served it at a rate of 19.5% per annum