What is a line of credit?
When we talk about what a line of credit is, we are referring to a flexible financing option with which a financial entity makes a specific amount of money available to the client for a specific period of time.
How does a credit line work?
It is important to know how credit lines work. As we say, the customer accesses the money as he/she needs it. This can result in the user withdrawing all or only part of the money during the fixed period of time.
This financing mechanism has an advantage: the customer only pays interest on the amount of money he has used at the end of the agreed period, but not on the entire amount included in the credit line.
Obviously, the amount of money used must be repaid with interest beforehand, within specific terms and time limits.
Another benefit of this system is that, at the end of the repayment of the total amount used, the credit line can be renewed to make the initial amount available again in case of need.
Who can benefit from credit lines?
Large companies and SMEs can benefit from credit lines, as they are a very flexible form of financing that adapts to all kinds of needs.
It is a short-term financing solution for companies, which allows funds to be used according to the needs of each business.
Therefore, credit lines provide numerous advantages to large companies and SMEs:
- Flexibility. Companies can draw on the money according to their needs up to the agreed limit, with different amounts and as many times as they need.
- Immediacy. Access to the money is immediate after contracting the credit line. There is no waiting time for the company to continue with its normal activity.
- Convenience. It allows liquidity needs to be covered as if it were a current account, so that companies can pay their salaries, pay suppliers, deal with unforeseen events or face any other liquidity need.
For all these reasons, this financial solution is mainly aimed at companies, which have recurring and periodic expenses that are repeated every month. In this way, they can easily meet all their obligations, as the credit lines are not earmarked for a specific purpose, so they can be used to meet a wide range of different expenses.
In addition, at the end of the term, there is the possibility of re-activating the credit line or even doing so automatically.
How to apply for a line of credit for your business?
A line of credit can be, for all that we have seen, a very interesting financing solution for your business. To apply for it at Aresbank, all you have to do is contact our team of professionals and we will inform you of the steps to follow to be able to access the financing that your company needs at any given moment.
We will study your case in order to offer you the personalised solution that best suits your needs, so that you can efficiently manage your cash flow, deal with unforeseen expenses, take advantage of immediate investment opportunities or maintain your company’s financial balance without resorting to long-term loans that could generate greater financial commitments.
We will tailor a strategic plan for you, with the most advantageous personalised financial solution for your business.