Advantages of bank credit line

Advantages of bank credit line – Along with consumer lending and the growing popularity of credit cards , the interest for many business owners is a type of loan , as renewable and non-renewable credit line . If after signing the loan agreement the usual money to the borrower comes at the same time , when you open a credit line funds will be transferred periodically over a fairly long time period. All details of the credit line provided by the Contract .

Before signing the contract for this type of loan the borrower and a representative of the credit department agree about the size of the total amount of credit and separate tranches , as well as the timing and methods for providing credit to the borrower . Repayment of the loan , as well as the provision of credit facilities not provided a momentary contribution , and in the form of periodic payments. Treaty stipulates mandatory credit line two such thing as a credit limit and debt limit .
Credit limit – the maximum amount that the borrower can get from a bank for the life of this type of loan . Well, the debt limit – this is the limit that restricts the flow of new credit to the borrower . Debt limit can not be exceeded , and as long as the borrower does not repay their debts , new acquisitions will not.

Credit line of business enjoys a well-deserved popularity. After all, doing business is accompanied by recurrent deficit finance related with some time lag between the receipt of funds from the sale of goods and the need to purchase new materials , compensation of employees , transportation and utility costs and the payment of taxes . Funds coming from a credit line , used to prevent the emergence of financial holes in the budget . And while the borrower gets rid of the need to be every time the bank and enter into another loan agreement .

All the activities of the banks is based not only on providing loans to its customers , but also on the timeliness of payments , which resulted in a profit banks , allowing them to exist in the stormy sea of modern business. Today, despite the competition, credit departments of banks are very serious selection of potential loan recipients . Not every application for a credit line granted. Potential borrower undergoes rigorous testing , the main emphasis has been carried out on its solvency .

Trying to determine whether this would be the borrower able to perform its obligations under the loan , bank employees appreciate not only the size of the business and the money invested in production, but also the turnover of finance, costs and benefits of production. Conclusion shall be made only after a thorough analysis made on the basis of the financial statements provided . Understandably, each applicant for a credit line must necessarily provide the bank with the necessary financial documentation.

Unlike non-renewable line of credit is that the new installment may come at the expense of the borrower at the time when the previous one has not yet been repaid. When concluding an agreement on the revolving line of credit delivery next tranche can be expected only after the full repayment of the loan , together with the provisions of interest.

Now about those advantages that the popularity of the credit line borrowers is growing steadily. First, it is a long period of use without the need for regular visits to the bank. Second, the ability to control the limit of individual tranches that allows timely liquidate financial holes in the budget and save their own funds on a percentage of the loan.

Third, the opportunity to quietly do business without the urgent need to make payments on the loan. Fourth, the high -speed service credit. Fifth, you can open a line of credit in the currency in which the basic financial transactions in the business , which eliminates the need for conversion .