Definition:
A fixed amount of money that a company can draw against from a lender. A business applies for a line of credit with a lending institution just like applying for a loan. However, unlike a loan, the borrower only pays interest on the amount actually used.
A line of credit is usually for an unlimited period of time. A business makes periodic payments against what has been borrowed. Such letters are useful when dealing with a new vendor to establish credit worthiness. No funds are paid by the bank, but credit requirements must be met.
Related Terms:
Credit
Creditworthy
Loan
Related Information:
Financing a Small Business
Related Books:
Finding Money: The Small Business Guide to Financing
How to Get a Small Business Loan: A Banker Shows You Exactly What to Do to Get a Loan
More Books about Financing a Small Business
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