What Are Commercial Credit Lines?

Commercial credit lines are issued by commercial banks and other financial institutions to businesses. This is a scenario in which a business can borrow as much money as they want up to a specific credit line. Once the borrower is approved for the credit line, they do not have to seek approval every time they want to borrow money. They can simply access the money as they need to.

Interest Rate

Typically, a commercial credit line will carry with it a higher interest rate than a traditional fixed loan would. However, many businesses love having commercial credit lines because they present a great deal of flexibility to the owner. Once they borrow the money from the lender, the business typically has a certain amount of time that they have to pay it off. They could make minimum payments over the course of the loan or they could pay it off all in one lump sum.

Caution

Businesses have to be careful when using commercial credit lines. Many businesses have borrowed more money than they can afford from these types of credit lines and it ultimately led to their demise. These credit lines are typically based on the credit profile of the business.

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