Line of credit

Definition

A line of credit is a flexible loan from a bank or financial institution that sets a maximum loan balance that the borrower can access as needed. The borrower can draw upon the line of credit at any time, up to the maximum limit, and pays interest only on the amount borrowed.

Related terms

Interest: The cost of borrowing money from a lender, calculated as a percentage of the principal amount.

Principal: The original sum of money borrowed in a loan, or the amount still owed on that loan, excluding interest.

Short: Term Financing - A type of financing aimed at providing businesses with funds to resolve immediate cash flow issues, typically repaid within a year