From Wikipedia, the free encyclopedia
A line of credit is any credit source extended to a government, business or individual by a bankor other financial institution. A line of credit may take several forms, such as overdraft protection, demand loan, export packing credit, term loan, discounting, purchase of commercial bills, etc. It is effectively a bank account that can readily be tapped at the borrower's discretion. Interest is paid only on money actually withdrawn.
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Lines of credit are often extended by banks and financial institutions to creditworthy customers to address liquidity problems.
Lines of credit can be secured by collateral or unsecured.
[edit]Cash credit
A cash credit is a short-term cash loan to a company. A bank provides this type of funding, but only after the required security is given to secure the loan. Once a security for repayment has been given, the business that receives the loan can continuously draw from the bank up to a certain specified amount.
