It is no secret that the desire to make a business (regardless of its "size") more successful requires investment. Moreover, it is possible to calculate the amount required for this in advance, another question is that a phased expansion also requires regular cash "injections". And here the majority of entrepreneurs face the question - to issue a new loan each time or decide to open a credit line.

What is the difference?

It differs from a credit card in about the same way as a regular consumer loan. You apply for a loan once and you can use it once. If you need more money, you can contact the bank only after you have paid off the existing loan. You can use the funds from the credit card during the term of the "plastic", of course, acting within the framework of the loan agreement. With business loans, the situation is the same - when an entrepreneur submits an application, in case of a positive decision of the bank, he will receive the requested funds once and in full - if, of course, the requested amount is approved. The credit line allows you to use the allocated limit "in parts", choosing funds in tranches all the time while the agreement on the opening of the credit line is in effect. All the details of such lending - terms, sizes of these very "parts", limits - all this is negotiated even before the signing of the agreement.

Opening conditions

As a rule, a credit line is opened for 2 years, although sometimes exceptions can be made and the use of funds is allowed for a longer period. As with other types of business lending, the bank will almost always require the provision of collateral - collateral, property owned by the borrowing firm. However, if you are a regular client of this bank, you have proven yourself well throughout the entire period of cooperation and you have a stable financial position, you can count on an unsecured loan. You will also have to transfer your main checking account to the credit structure in which you want to open a line of credit. This will allow the bank not only to make sure once again in the stability of your business, but also to regularly monitor this stability.

What is the advantage of a credit line for a borrower?

The main advantage of this type of loan over the rest is its "final cost". Due to the fact that you take the money in parts, the bank will charge for the use according to the actual spending of the funds, and not from the allocated limit. Moreover, you will only pay for the actual period of use - as soon as you return the money to the credit account, the accrual of interest stops. An important point is that when making out several loans in turn, for each you will have to collect anew a package of documents each time, wait for a bank decision, etc. In the case of a credit line, everything is easier - you collect documents once, and use the money as much as you stipulate with the bank, which will save you from many problems.

Bank benefits

In addition to fees for using a credit line, the bank will most likely make you pay a fee for opening such a long-term credit account. The amount of this levy usually does not exceed a couple of percent of the opened credit limit. The fee for the use of funds varies from 10 to 20 percentage points, the specific figures are decided by the bank on an individual basis and depend on the level of credit risks, the solvency of the borrowing company, the amount and period of the credit line.

Which provides for the use of funds within the established limit. The repayment and disbursement of money occurs in stages - such operations are called a tranche. As a rule, the schedule of financial flows of the credit line is set in the most convenient mode for the borrower. When the debt is fully repaid, the borrower is offered to reopen the line of credit, often on more favorable terms as part of the new agreement.

Types of credit lines

A credit line without renewal assumes the use of funds within a certain limit. In this case, the borrower receives funds within one tranche and undertakes to repay the debt within a predetermined time frame. The maturity date is determined by the client of the bank, but the entire debt must be repaid in one payment.

Renewable credit line (revolving). It implies the use of a lending scheme with the periodic receipt of certain amounts of borrowed funds within the terms and limits established by the bank. Partial and full repayment is allowed. Within the framework of the revolving credit line, it is possible to borrow money in a repeated order.

Credit line agreement

An agreement on opening a credit line is a specific document in which it is customary to use concepts denoting the features of cooperation between a bank and a borrower within the framework of opening a credit line. First of all, we are talking about loans with a certain limit, when the amount of funds issued is limited to a specific number.

In this case, the refund does not lead to an increase in the limit, respectively, we are talking about a non-revolving credit line. There is also the concept of a debt limit, which sets a limit on the total amount owed. If the company manages to return part of the borrowed funds, the amount of the available credit limit is restored. In this case, we are dealing with a credit line of a renewable type.

Business credit line

A credit line is a type of long-term financing, which provides for the opening strictly for a specific project. It is recommended that you prepare a carefully considered business plan before applying for a line of credit. Ideally, if a successful smaller-scale project is already working on the basis of the presented document. Without substantiated documentation, thanks to which the entrepreneur will be able to reasonably prove the need for income and expenses of the specified level, the provision of long-term targeted financing is impossible as such. A credit line is often opened to pay for the services of certain companies, replenish working capital, purchase goods, materials or raw materials for production, finance the purchase of vehicles, purchase equipment or real estate.

Credit line for individuals

A credit line for an individual in the modern interpretation is an ordinary plastic card with a credit limit revolving as the debt is repaid. Within a certain amount, funds are available at any time, and the repayment period is stretched over a sufficiently long period, which is most convenient for the borrower.

Among the credit lines for individuals, loans for housing construction or education are very popular. As a result of receiving individual tranches, the borrower is able to significantly reduce the percentage of the debt on.

Credit line rates

The interest rate is one of the key conditions under which commercial banks open credit lines to legal entities, for which the latter need:

1. Choose a floating or fixed interest rate, which will be valid throughout the entire loan term.
2. Discuss at the negotiations the size of the interest rate, which will be set in the framework of each operation when working with a credit line.

As a rule, the size of the interest rate is determined on an individual basis, depending on the level of risk, the nature of the enterprise, the financial position of the borrower, the duration of the contract, the amount and currency of the loan. The average amount of interest rates on credit lines ranges from 10 to 20%. Some commercial banks set a commission for opening a credit line, which rarely exceeds 2% of the amount.

A non-revolving line of credit is

A non-renewable credit line implies the setting of a certain limit on the disbursement of funds that are received in separate tranches within a period that is stipulated in advance, as well as within the maximum fixed amount. The borrower has the right to use the loan at a convenient time according to the schedule, which is stipulated by the provisions of the loan agreement. When working with a non-revolving credit line, debt repayment does not affect the increase in the available limit.

Credit line repayment

Borrowing and repayment of funds under an open credit line occurs strictly within the established limit. Regardless of the nature of the repayment (in full or in parts), it is required to pay off the obligations within the time frame predetermined by the signed agreement. The size of the open line, as a rule, is predetermined at the stage of negotiations with the borrower. The starting point in determining the limit is the borrower's balance sheet data, in particular the volume of the working capital of his enterprise, as well as the sources from which the financial flows coming to the enterprises are formed.

Credit line term

Lines of credit for small businesses are rarely opened for periods of less than three or more than twelve months. Interest rates are around 15%. Large and medium-sized businesses receive more favorable conditions in the form of a rate of 10%. Large companies can also count on more flexible loan terms and extended debt repayment periods, which in some cases can be up to several years. But individual exceptions only confirm the rules. In each specific case, bank employees are required to make sure of the liquidity of the collateral, the high level of reliability of the enterprise and other factors that characterize the company as a reliable and stable borrower.

Accounting for credit lines

Analytical accounting of the company's credit lines is kept on specialized personal accounts. The level of detail is in the context of each trance. Transactions are matched on balance sheet accounts according to the principle of compliance with the actual maturity of the funds received. The most important thing is that the deadlines for the provision, recorded in the accounting, coincide with the deadlines specified in the contract. In some cases, the term of the actual placement of the tranche coincides with the time interval within which the outstanding debt to the second-order accounts of the balance group is reflected. In this situation, tranches are accounted for by the lender on the same personal account of the 2nd order of the balance group.

Tips from Sravn.ru: Do you want to open a line of credit privately for your personal needs? Head straight to the nearest commercial bank and claim with the highest limit possible on favorable terms. Do you own an enterprise that requires additional funds to develop or launch a parallel project? Excellent. In your case, you will need a carefully prepared business plan to obtain a line of credit. Support these calculations with examples of successful business in real life and the bank is likely to open you a line of credit with a sufficient limit.

Credit line. Lending limit

A line of credit means the right of the borrower to receive from the bank and use, within a certain period of time, funds within the maximum amount (limit) of loan funds agreed by the parties that can be provided to the borrower (issue limit), and (or) within the maximum amount of the borrower's one-time debt to the bank (debt limit).

The conditions and procedure for opening a credit line are determined by the bank and the borrower either in a special general (framework) agreement / agreement, or directly in the agreement for the provision (placement) of funds. The condition for opening a credit line may be contained in the loan agreement. The fact that the loan amount is determined by establishing in the agreement the limit of the credit line and the conditions for submitting applications for the transfer of the next tranche of the loan does not entail the recognition of the loan agreement as not concluded (clause 12 of the information letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated 09/13/2011 N 147). In other words, it is not necessary to conclude a credit line agreement separately from the credit agreement.

The period for which a credit line is opened, the issue limit, the debt limit are determined in the agreement (agreement) between the bank and the borrower.

Attention

The agreement on opening a credit line, unlike a loan agreement, does not determine the specific amount of the loan that the bank undertakes to provide to the borrower, but the maximum amount (limit) of funds that the borrower is entitled to use during the term of the agreement.

An agreement on the provision of a credit line is essentially a framework agreement (Article 429.1 of the Civil Code of the Russian Federation), since it determines only the general conditions of the obligations of the parties arising in connection with the provision of credit to the borrower, while the specific amount of the loan within the credit limit is determined on the basis of the borrower's application executed by the bank.

In practice, such types of credit lines as revolving, non-revolving and framework lines have become widespread. These terms are reflected, in particular, in the Regulations for the provision of loans to legal entities by Sberbank of Russia and its branches dated 08.12.1997 N 285-r (approved by the Committee of Sberbank of the Russian Federation for the provision of loans and investments, hereinafter referred to as the Regulations).

A revolving line in the aforementioned Regulation means a credit line in which the loan is issued and repaid within the established issuance limit throughout the term of the credit line agreement, while the balance of the issuance limit is increased by the amount of loan parts (tranches) received by the borrower in under this line of credit and returned to them to the bank. A revolving line of credit is usually opened to a borrower to carry out regular financial and business transactions (as a rule, these are trade enterprises), as well as to cover the general gap in the payment turnover of industrial, agricultural and transport enterprises.

When a non-revolving credit line is opened, the loan is issued within the established limit, while the repaid part of the loan does not increase the free lending limit. A non-revolving credit line is opened for making various payments related to one contract or consignment of goods (for example, to pay for customs clearance, transshipment, transportation and other expenses).

Finally, a framework credit line is opened to the borrower to pay for individual deliveries of goods under one contract, implemented over a certain period, or to lend to targeted programs of the borrower. For each delivery (or stage of the target program), a separate loan agreement is concluded within the framework of the general agreement on the opening of a framework credit line (clauses 1.5.2 - 1.5.4 of the Regulations).

That is, in fact, the general agreement on the opening of a framework credit line provides for the obligation of the bank to conclude with the borrower, at his request, a loan agreement (or agreements) for an amount within the issuance limit.

Often, the bank charges a separate fee from the borrower for opening a credit line. A fee (commission) is often set for other actions related to the opening of a credit line, for example, for maintaining a credit line limit, etc. However, judicial practice considers the issue of the legality of including the terms of such payments in the loan agreement from the point of view of whether they are established for the provision of any independent service by the bank to the client. If the corresponding fee (commission), established in the form of periodic payments, does not create any beneficial effect for the borrower, that is, it is not actually a payment for a service, the courts regard it as an element of the payment for using the loan. If the commission is charged in the form of a one-time payment, but is not a payment for an independent service provided by the bank to the borrower (such is, for example, the commission for opening a credit line), the courts recognize the condition of the loan agreement on payment of the commission null and void, and the funds received by the bank in the form of such a commission - unjust enrichment of the bank, which is subject to return to the borrower (Resolutions of the Presidium of the Supreme Arbitration Court of the Russian Federation dated 06.03.2012 N 13567/11, the Third AAS dated 29.06.2012 N 03AP-1759/12).

In relations with an individual borrower under a consumer loan agreement, the concept of "credit line" is not used, however, the legislation provides for such relations an essentially similar term "credit limit", which means the maximum amount of funds provided by the lender to the borrower, or the maximum amount of a lump sum debts of the borrower to the lender under the consumer loan agreement, under the terms of which partial use of the consumer loan by the borrower is allowed. In the case of concluding a consumer loan agreement with a credit limit, the condition of such a limit and the procedure for changing it must be provided for in the individual terms of the agreement agreed by the bank and the borrower (clauses 1, 4, part 1 of article 3, clause 1 of part 1). 9, article 5 of the Federal Law of December 21, 2013 N 353-FZ "On consumer credit (loan)", hereinafter - the Law on consumer credit).

If the consumer loan agreement is concluded with the condition of the credit limit, and during the previous month the borrower's amount of debt changed, the bank is obliged to send the borrower the following information to provide access to such information:

The amount of the borrower's current debt under the agreement;

Dates and amounts of payments made for the previous month and the forthcoming payment of the borrower under the agreement;

An affordable consumer loan amount with a credit limit.

Information is provided in the manner prescribed by the consumer loan agreement, but at least once a month. The borrower can receive such information from the bank and on his own initiative. Once a month this information is provided to him free of charge and any number of times for a fee. The same rules apply to consumer loan agreements, under which creditors can be not only banks, but also other organizations that are entitled to carry out professional activities for the provision of consumer loans, in particular, microfinance organizations, pawnshops and credit cooperatives (

Revolving line of credit and non-revolving credit line - these are the concepts that many banking clients face. Of course, they are interested in the answer to the question: what is it? What are the similarities and differences? How are both used?

Credit line- a specific type of interaction between the lender and the borrower, within which the second has the opportunity to receive loans many times and without prior approval.

The main difference between the CL and the consumer one is that the user of credit funds to apply for the next loan does not need to visit the bank office again, submit an application, transfer documents, wait for a decision, etc.

However: the final amount - the credit limit - is severely limited. For example, a citizen can take 10 loans of 100,000 rubles each, or 100 loans of 10,000 rubles each, but above the level of 1,000,000 rubles. he will not be able to rise. At least until all old loans are covered. This is where the border between revolving and non-revolving lines of credit passes.

Revolving credit line

Consider the essence and procedure for applying a revolving credit line (ON).

What's this?

ON- this is a system in which the client takes loans over a long period of time. An alternative name for this type of CL is revolving: a person receives loans until the moment the credit limit comes, which then becomes available after all debts have been paid.

Note 1. Often, along with such a tool, a bonus option is used - a grace period for crediting (grace period). Its essence is that for some time after the debt has arisen, the client can return the loan without interest. This is how everyone's work is arranged: for them, the grace period is an obligatory element. Sberbank has a grace period of 50 days, while some of its competitors in the Russian market have up to 100 days.

How is it used?

Let's look at an example.

A certain citizen X has access to a credit limit of 100,000 rubles. If he has a credit card after paying off the debts (principal and interest), the limit is restored.

The user took out a loan in the amount of 20,000. The interest on this amount later amounted to 1,000 rubles. In this case, the available limit has decreased to 100 000 — (20 000 + 1 000) = 79 000 ... Now it is impossible to get a loan more than the resulting value. Further payments will increase the credit limit in proportion to the deposited amounts.

When the borrower pays off the debt in full, the limit will return to its original value of 100,000 rubles.

Non-revolving credit line

Now we will consider the essence and procedure for applying a non-revolving credit line (NRCC).

What's this?

NVKL- such a credit limit, the exhaustion of which excludes further receipt of borrowed funds for the borrower under the current agreement.

What is the plus for a banking company? For her, NVKL is convenient in that the amount provided is ultimately strictly limited. In this way, it resembles a consumer loan.

For the client, a plus - there is no need to withdraw all funds at once.

The factor of severely limited use of borrowed money contributes to stricter adherence to credit conditions.

How is it used?

Client X received NVKL in the amount of RUB 500,000.

At different times he received two tranches - 50,000 and 100,000. After that, the balance on the credit limit was 500 000 — (50 000 + 100 000) = 350 000 rub. When this value is completely depleted, access to credit money will be closed.

Note 2. The loan after the limit is exhausted becomes unavailable in any case: even if the client covered the debts on time.

Similarities and differences

To better understand the essence of ON and NECL, you should consider similar points and distinctive features. This is what we will do further.

General information

Both types of CL have a credit limit, which determines the limit on loans for a specific period of time. But: in the case of a renewable line, it can both go down and recover after the debt is repaid, and in the case of a non-renewable line, it only goes down.

NVKL differs from ON in its main advantage: the lender takes almost no risk. The bank is able to immediately determine how long it will take for the client to cover the loan - while maintaining his current financial capabilities and when they deteriorate. From here the credit limit is determined in advance.

It is logical to assume that with low risks, the banking company does not consider it necessary to compensate them, for example, with high interest rates. As a result, we have the following circumstance: interest rates and other conditions on the offers of NVKL are distinguished by greater loyalty to the borrower.

The main plus is ON- the need to go through all the bureaucratic processes to obtain a credit line just once. After that, the problem of obtaining borrowed funds was resolved for a long time.

Thus, the conclusion suggests itself: a renewable line is beneficial to those who want to provide themselves with funds for a long period, and a non-renewable one - to those who seek to resolve only the current financial problem and in the shortest possible time.

Difference versus overdraft

There are technical and consumer differences here. We will consider the second ones, since they concern the clients themselves in the first place, and the first ones generally do not need to be known, because they relate to narrowly professional phenomena.

Below we will give the most significant parameters in the light of its comparison with KL.

Loan terms. It is much smaller.

Grace period. As a rule, not provided at all.

Conditions for connection. There are two of them. First, the client must have a good credit history - any delays will deactivate the overdraft. Second: additional security for the loan - this is implemented, for example, in the condition of acceptance-free debt coverage (it allows the bank to withdraw money from any receipts to the client's accounts within the institution without his consent).

Amount and term. For overdrafts, there are small loans and short lending terms. That is why, even together with interest charges, the client loses little.

Other types of CL

Frame line. Usually issued for legal entities. Opens for pre-defined projects. When the time comes for the implementation of the project (or preparatory measures in connection with it), the applicant company should only contact the bank with estimates.

Onkolnaya line. In fact, this is the same as an overdraft, but here we are talking about much larger amounts. The fact that loans can be taken out many times reminds ON.

Contract account line. In the case of this type of CL, the user opens a separate bank account: from it he can take money at any time for certain financial needs. It differs from the oncol line only in technical aspects.

Under what conditions are they provided?

It all depends on who is applying for a loan and for what purpose. ON is usually provided to legal entities. NVKL - to individuals. There is one exception here: these are credit cards - they are generally used by most of the solvent citizens.

In most cases, banks imply the following options for all types of CL:

1. The period of validity is from 3 months to a year. 2 or 3 years are very rarely approved. The exception is credit cards, which are usually valid for three years.
2. Interest rate from 13 to 29 percent. The fluctuation is explained by the client's solvency, the state of his credit history, the type of credit line, etc.
3. The maximum credit limit is from 100,000 to 300,000 rubles. This indicator is typical for the conditions presented to individuals. For companies, the limit can reach several tens of millions.

There are other functions / capabilities, but they are already related to the content of specific programs.

How is interest calculated?

The order of interest charges directly depends on what type of loan line we are talking about. However, there are also some commonalities.

Important! There is one general rule that applies to both renewable and non-renewable CL: the bank calculates interest for the time during which the borrower used the loan money.

It should be remembered that the earlier the loan is returned, the less interest will have to be paid. It always works. The type of credit line in this particular moment is not important.

Interest is calculated in accordance with a certain frequency: once a day, week or month. In addition, they may not be in the lending distance - they appear at the moment before the loan is repaid. Be that as it may, it is worth consulting in advance with an employee of a financial institution so as not to lose on delays in the future.

There is a nuance with credit cards: interest on them is charged only after the expiration of the terms of preferential lending. We have already mentioned which ones can be. But theory is one thing, practice is another. provides 50 days, but in fact the time interval ranges between 20 and 40 days. It all depends on the day after the activation of the payment instrument the client used it.

Note 3. When the grace period ends, interest is calculated every day.

Advice: in order to get the longest possible period of preferential lending, it is best to take a loan immediately after activating the credit card or upon the next reporting date.

Conclusion

Credit lines are convenient financial instruments for both legal entities and individuals. At the same time, renewable CL is convenient in the long term, and non-renewable, respectively, in the short term.

In contact with

Banking institutions offer individuals / legal entities many types of services. Perhaps the most frequently requested is lending. At the bank, we can take an installment plan, a classic loan, an overdraft, a targeted loan. Credit lines are one of the main types of lending.

A credit line is a documented agreement between a borrowing entity and a client, whereby the entity undertakes to provide limited or unlimited loans to the borrower within a fixed cash limit.

To make it clearer, let's look at an example: the company "Romashka" makes sweets, in the bank "Money" they opened an annual credit line (credit line) for 50 million rubles at 7% per annum. In the middle of the year, the company “Romashka” has a “cash gap” of 10 million rubles, which urgently needs to be covered.

The company can quickly apply for a loan in "Monetary" and not waste time on processing a pile of documents or agreeing on all the nuances, because this was not done yet at the stage of opening the contract. In practice, it is more profitable for a company to work under such a scheme than to take out a loan or a targeted loan.

To receive money, the representatives of "Camomile" just need to agree with the lender the terms of the loan repayment and put signatures on the documents. Although the company has a kind of handicap for debt repayment, it can pay off ahead of schedule.

When closing a debt, the company pays interest in addition to the debt for the use of funds.

Service classification

The relationship between the lender and the borrower is highly dependent on the type of CL. Let's dwell on the most common types.

Renewable (revolving)

With this type of relationship, the client has the right to replenish his limit and use it an unlimited number of times before the expiration of the contract.

Example: “Romashka” opened a one-year credit line in “Money” for 50 million rubles. A month after the agreement was drawn up, the company took out a loan of 10 million, and a couple of months later a loan of 5 million was taken. It turns out that by the end of the year the company can take loans for a maximum of 35 million rubles.

Soon, “Romashka” has funds to pay off the debt, the company pays the bank 15 million rubles. After that, the "Camomile" limit is renewed to 50 million rubles, the company can again count on this maximum amount.

An analogue of a revolving systemic loan for individuals is a regular plastic credit card. The holder spends money within the established limit, then extinguishes the debt and gets the opportunity to use the money again.

These types of systemic loans are opened mainly because of their practicality in the long term.

Non-renewable (linear)

A non-revolving loan is a program under which borrowed funds cannot be reused even if the debt is repaid.

Example: the same “Romashka” with an annual contract for 50 million rubles first took out a loan for 10 million rubles, and then another 5 million. Even if “Romashka” pays off the debts, its limit in the future will be 35 million rubles. The company will no longer be able to roll back the limit to the initial 50 million rubles.

Bottom Line: Renewable / Non-Renewable Line Differences

The main difference between revolving and non-revolving loan programs is the very mechanism of work. In the first type of lending, the turnover of bank loan funds is not limited in any way, in the second, on the contrary.

Non-renewable lines give less freedom and confinement, while renewable lines can “tempt” the borrower to spend as much other people's money as possible.

Another difference is the way you pay off your debt. If a customer has a non-revolving line open, the deadline for covering the debt for him will be the expiration date of the contract. This means that if the line was opened for a year, it can be extinguished before the end of this year.

If the borrower uses a revolving program, for new loans, he needs to negotiate with his lender the maturity of the loan. Most often, these deadlines are rather tight. This causes a lot of financial hassle when dealing with a large amount of money. Not every company has the ability to quickly pay off debt.

Other types of system loans

These types of systemic loans are not as widespread as the previous two, but they also occur periodically:

1. Framework. Such a loan is usually issued for the collateral of several related projects at once. The bank and the borrower sign a single general agreement, and then agree on separate conditions for each further loan (they are necessarily included in the framework of the main agreement).
2. Oncolleges. Oncall is a method of lending in which the loan has a fixed amount, time. As the debt is repaid, the borrower's cash limit is restored by an equal payment amount.
3. Contour correction. With such a loan, the banking institution creates an active-passive account for the borrower. The borrower is free to use it and then replenish it. With each replenishment, the money will be sent to the credit account and paid off.

There are such multicurrency lines and so-called “on demand” loans. The first are short-term, used mainly for foreign economic operations. The latter are issued at the request of the borrower, all details are agreed upon individually.

Pros and cons of credit lines

Let's dwell on the specific pros and cons of CL. Let's look at an example of a table:

It should be borne in mind that each organization has its own conditions for opening a CL. Some of them may not be the most beneficial for the borrower.

Provision of services in Russian banks

Almost all large Russian banks provide a systemic loan service. It can be ordered from the following banking institutions:

• "European";
• Sberbank;
• VTB;
• "Alpha";
• Gazprombank;
• "Rosselkhozbank" and many others

The conditions for opening such an account in each of these institutions are different, they depend on many factors and the requirements of the borrower.

Russian banks open CL for different currencies. These can be domestic rubles, dollars or euros. The standard duration of such a program is a year, but it may take longer.

When signing a systemic loan agreement for large amounts, credit organizations often ask for collateral.

The maximum limit, annual interest rate and other nuances are determined individually. The terms of the transaction are highly dependent on the financial position of the borrower, his solvency, the number / volume of financial flows.

CL for individual entrepreneurs

The target audience of these are entrepreneurs. Most often, companies have several financial agreements with different organizations open at once.

Why is this type of lending so in demand? There are several reasons for this:

• Significant time savings when obtaining a loan;
• Reducing the risks of losing liquidity;
• Optimizing cash flow management.

The credit line acts as a kind of insurance in case of emergency. If a company has a financial gap, and there is no way to close it, it simply turns to the bank and receives money in debt.

When signing an agreement with an organization, borrowers need to remember that the bank may have problems with a license or financial assets. Due to internal problems, the client may not be given a loan on demand, because there is no money in the institution itself. In such cases, the business can suffer significant damage. It is for this reason that it is better for companies to have multiple open lines of credit.

Differences between CL, overdraft, credit

These three concepts are very different from each other. Let's understand the terminology:

KL	Credit	Overdraft
A certain amount of money that he delivers to the borrower in parts over a fixed time. Debt repayment method depends on the type of system loan. Who is suitable: sole proprietors and small businesses.	A one-time debt to the borrower can be issued with or without interest. A loan is always a fixed amount, the client does not receive additional payments after drawing up the contract. You can repay the loan at once in full or in parts. Suitable for: physical clients.	This is the name of a quick loan, which is issued to a client on demand. This type of debt is repaid by debiting money from the client's debit account (while the loan and line of credit must be repaid by yourself). Suitable for: trading companies with a large cash turnover (the overdraft limit directly depends on this factor).

A credit line and a standard loan are quite similar in their specifics, while overdraft can be considered a fundamentally different way of lending.

Differences between CL, target loan, consumer loan

Very often enterprises, in the absence of financial resources, turn to consumer loans. However, these types of lending are not the most profitable; targeted loans are a more attractive alternative.

With a targeted loan, the borrower takes money for a specific purpose, which is necessarily prescribed in the bank agreement. If the client spends the provided funds not for the specified purpose, the bank has the right to demand early repayment of the debt and the payment of additional fines.

So what is the difference between a line of credit and a targeted loan? Let's look at an example of a table.

	Target loan
The service can be used when the need arises. If you do not know exactly when you will need the money, you can go to the branch and get some of the funds.	The target loan can be issued after the fact. The client signs the contract and then receives the money.
The client can receive funds very quickly.	You need to spend time raising funds.
Banks usually do not refuse this service, but in order to obtain additional guarantees, they may ask for a deposit. If the borrower agrees to the pledge, the bank can significantly reduce the interest rate, speed up the process of completing the transaction.	There is always a risk of being rejected for a loan, such situations are quite common.
This type of service has a lower interest rate, more favorable conditions.	These types of loans are often not beneficial for the borrower.

What type of lending to choose?

It all depends on the type of company and the purpose of taking out a loan. If you have a small company or individual entrepreneur, a line of credit will be a suitable solution. If you are an individual, give preference to loans or targeted loans. For large companies, an overdraft is best suited.

When choosing a loan type, be sure to study all the nuances, consult with specialists. In such situations, it is better to discuss this topic with an uninterested specialist (bank employees are most often interested in benefit specifically for the company, and not for the client, keep this in mind).

Interest transactions

A credit line, like other types of lending, is subject to interest. The type of interest rate is immediately prescribed in the bank agreement when opening a credit line, it can be:

1. Fixed. This means that the interest rate does not change until the expiration of the contract. For example, if you opened a loan for 10 years at 15% per annum, you will pay so much interest until the debt is fully repaid.
2. Floating. With this type of rate, the amount of interest for the use of money can vary.

The interest rate can act either on the entire line limit or only on those funds that the borrower has used.

Often, additional expenses are incurred for using the finances of the borrowing organization. For example, additional interest may be charged for cashing out funds or reserving them in bank assets.

Closing a credit line - causes and consequences

The main reason for canceling the service is non-compliance with the terms and conditions specified in the contract. If the bank has ceased cooperation with the borrower, the latter is no longer eligible for credit.

If the banking institution has closed your system loan, try again. If the lender considers you to be a responsible borrower that meets the basic requirements, the line of credit may be reopened.

Can I increase my loan limit?

If a person already has a line of credit at the bank, he can ask for an increase. When considering an application, several main points are taken into account

• Client's solvency;
• The volume of money turnover (it must correspond to the amount to which the limit is planned to be expanded);
• The financial reputation of the client (whether the client is overdue due to the payment of the debt).

If the client meets all the requirements, the application for an increase in the limit will be approved. You need to find out about the nuances of drawing up an application directly at the bank you are interested in, depending on the specific institution they may differ.