Line of Credit Amount (a) During the availability period described below, the Bank will provide a line of credit to the Borrower.
Borrower’s obligation to repay advances under the Line of Credit shall be evidenced by a promissory note dated as of (“Line of Credit Note”), all terms of which are incorporated herein by this reference. Line of Credit Subject to the terms and conditions of this Agreement, Bank hereby agrees to make advances to Borrower from time to time up to and including April 2, 2015, not to exceed at any time the aggregate principal amount of One Million Five Hundred Thousand Dollars ($1,500,000.00) (“Line of Credit”), the proceeds of which shall be used to finance Borrower’s working capital requirements. Revolving Line of Credit (a) Upon the terms and conditions (including, without limitation, the right of the Lender to decline to make any Loan so long as any Default or Event of Default exists) and relying on the representations and warranties contained in this Agreement, the Lender agrees, during the Commitment Period, to make Loans, in immediately available funds at the Applicable Lending Office or the Principal Office, to or for the benefit of the Borrower, from time to time on any Business Day designated by the Borrower following receipt by the Lender of a Borrowing Request provided, however, no Loan shall exceed the then existing Available Commitment. Related to DRAW-DOWN OF EQUITY LINE OF CREDIT
However, a line of credit, used solely as a way to hedge your bets on an uncertain economy, may be an unnecessary expense that offers few, if any, benefits.ĭon’t miss out on ET Prime stories! Get your daily dose of business updates on WhatsApp. With the option to draw down money as needed, a business line of credit can be the right move for businesses that are concerned about cash flow issues in the future. “If they wait until they get that large order and they need the line of credit to produce it, it’s going to be harder to go to the bank and ask for that money at that time and get it turned around quickly,” Huntington says. Shauna Huntington, from the NAWBO Institute of Entrepreneurial Development, the non-profit education foundation of the National Association of Women Business Owners, says that business owners who want a line of credit should consider getting it before they actually need it. WHEN SHOULD YOU APPLY FOR A LINE OF CREDIT? Katz says, “if a line of credit is something that you’re going to be looking at, try to keep your receivables below 60 days.” 1 criteria,” Katz says.Īlso, keep in mind that older accounts receivable can be considered at risk of nonpayment. “Receivables are important for any kind of a loan product, but in lines of credit, your accounts receivables are really the No. Accounts receivable, the money owed by customers for goods or services, represents future revenue that can be used to pay off your line of credit. If the benefits of a line of credit are stronger than the drawbacks for your business, and you decide to apply for one, lenders will typically review your business profitability, credit score and accounts receivable.
WHAT DO YOU NEED TO GET A LINE OF CREDIT? Also, because lenders look at credit lines, even unused ones, when evaluating a borrower, a line of credit could negatively affect your ability to get other types of financing. It takes time to apply and complete the necessary paperwork, the lender may charge a maintenance fee if you don’t use the line and your limit may be lower than you want. While a line of credit could be used as a reserve or emergency fund during challenging economic times, there are drawbacks to consider when getting one that may not be used. If fluctuating cash flow isn’t a concern, your decision to apply for a line of credit is more complicated. When you decide to apply for a credit line, “you should try to get whatever line is available to you,” says Katz, “because even if it doesn’t fully cover your costs, drawing it down and repaying it regularly will help you earn your way to a larger line.“ĪRE THERE DRAWBACKS TO HAVING A CREDIT LINE?
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