What is a Line of Credit
A Line of Credit is a flexible financing solution that enables businesses to access funds up to a pre-approved limit as and when they need it, with interest charged only on the amount borrowed. A line of credit can be secured or unsecured, and may require collateral, such as property or assets, depending on the lender’s requirements.
This type of financing can be used to cover short-term cash flow needs or to take advantage of unexpected opportunities. For businesses and SMEs, a line of credit is a financial agreement with the lender – the repayment period is typically flexible, and businesses can draw and repay funds as needed, making it a useful financing option for businesses with fluctuating cash flows.
What is an Overdraft
A business Overdraft is a type of short-term loan that allows a business to overdraw their bank account up to a certain limit. The overdraft limit is typically set by the bank, and interest is charged on the amount borrowed.
A business overdraft similarly gives you access to finance when you require it, which is open to you when you withdraw funding amounts that exceed your business account’s balance. Overdrafts are typically unsecured, and may require the business to have a good credit history with the bank.
