‘Revolving credit’ is among the most popular forms of credit. A credit card with a line of credit is an example of revolving credit. A revolving credit line can be extended to an individual or a business. When used properly, revolving credit can serve as a valuable commercial lending solution which can grow your company by leaps and bounds.
Today, we’ll explore revolving credit in a commercial context.
A revolving line of credit is an option that’s offered by some commercial lenders. The commercial lender typically issues a line of credit that’s linked to the company’s account; that credit can be used to purchase supplies, equipment and other items simply by writing a check from the credit line.
Revolving credit lines can also be offered as an in-house credit line by a particular company, such as a supplier. In this case, that credit line is only ‘usable’ at that particular business.
The lender earns money by charging interest on the portion of credit that’s utilized at any given time. So while the company may have a credit line of $100,000, you don’t pay interest on that full amount (unless you’ve exhausted your entire line of credit.) You only pay interest on the amount of money that has actually been borrowed.
Some revolving credit lines are an unsecured loan in that the lender doesn’t have any collateral in the equation. For this reason, unsecured revolving credit lines are subject to slightly higher scrutiny than what you might see with a secured credit line, where the lender has access to collateral that could be reclaimed and sold if the account were to go into default.
A revolving line of credit is favorable over a commercial loan because it’s ‘reusable’ so to speak. With a commercial loan, it’s a one time deal where you receive a single lump sum with a set number of payments. Once you’ve made all of those payments, the loan is repaid and the account is closed. With a revolving line of credit, you have a commercial credit line that’s open and available to your company indefinitely (assuming you remain current with the monthly payments.) Over the years, you could theoretically borrow many times the credit limit, assuming you pay off the balance.
So while a one-time commercial loan may be a good solution to cover a one-time expense such as new equipment, a revolving credit line is a better option for commercial lending clients who need continual access to credit.
If you’d like to learn more about revolving credit lines and other commercial lending solutions, like equipment leasing and financing, unsecured loans and floor plan lending, contact Complete Commercial Finance today! Call 860-906-4848.
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President, Complete Commercial Finance
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