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    Among the ways of replenishing working capital or simply eliminating the cash gap within the framework of the main activity of an enterprise, opening a credit line is rightfully considered to be one of the most effective.

    What is a credit line?

    An open credit line is a type of loan for a legal entity. Unlike a loan, this form of lending allows you to receive money not in a lump, but in parts (tranches) for a certain time. The terms of the loan and the obligations of the parties are specified in the contract, which is concluded between the bank and the borrower. Now let us know more about business line of credit.

    One of the important conditions for granting a loan within the credit line is the existence of a permanent relationship between the borrower and the credit institution. Simply put, in the overwhelming majority of cases, Russian banks offer to open a credit line only to their regular customers, who have a positive credit history and really good solvency.

    Credit lines can be divided into two categories:

    • renewable (with a debt limit), which allow to restore the debt limit after repayment of previously received tranches;
    • Non-renewable (with the issuance limit), the main feature of which is that the total amount of funds received by the borrower (during the term of the contract) should not exceed the limit.

    Features of the provision of this type of loan by banks

    The bank can provide a credit line in rubles, dollars or euros, and the maximum amount of the credit limit is determined on the basis of the creditworthiness of the legal entity, its credit history, the annual turnover of the enterprise and taking into account its needs. Usually the credit limit directly depends on the turnover on the borrower’s account.

    The terms for granting a credit line can vary from 3 months to 5 years. If the credit line is opened for more than one year, the bank can request adequate liquidity from the borrower-real estate, vehicles, land, commodity stocks, debts of debtors, equipment.

    A legal entity can obtain a loan on the following terms:

    • a fixed or floating interest rate for the entire term of the credit line;
    • Under the interest rate, established separately for each credit transaction within the credit line.

    The size of the interest rate is always set individually and depends on the currency and amount of the loan, the terms of the contract, as well as the financial soundness of the borrower, the life of the enterprise and credit risk. Interest rates can fluctuate within 10-20% per annum.

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