UK Accounting Glossary
Financing offered to businesses by banks or other financial providers to help the business with short-term financial needs. This term is often used in the real estate business, as well.
A line of credit, also called a credit line, is an arrangement between a bank or vendor and its customer that extends a certain amount of unsecured credit to that customer. A line of credit represents the maximum amount that the customer is allowed to borrow and owe. It acts as a loan, but, unlike a loan, a line of credit usually doesn’t require you to pay interest on the credit you don’t use. A line of credit is usually more fitting as a short-term loan than a long-term solution. Credit programs use a line of credit as a factor in their approval process; for this reason, borrowers might want to treat their line of credit as more than a mere guideline. Used wisely, a line of credit can help one’s financial growth, personally or professionally.
That company only survived the economic downturn because they had a generous line of credit at the bank that they used for the months their expenses exceeded their receipts.
Many homeowners take out a line of credit on their house, and use the money to make improvements that raise the overall value of the property.
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This glossary post was last updated: 10th February 2020.