Business Loan Application
Your application will be sent to several banks in your city, which are engaged in lending to small businesses. You can select one or several banks at once.
A credit line is a liability financial institution before the client to provide money loan within the predetermined amount at a convenient time for the borrower and in the parts necessary for him. In this way, it compares favorably with lump-sum lending, in which a person can receive the entire required amount only once on a predetermined day.
What is a credit line?
A credit line provides an opportunity to use bank borrowed funds as needed, while remaining within a certain limit. Depending on the solvency of its client, the bank can offer him a line of credit with a limit that will increase or decrease depending on how quickly the client takes out borrowed funds and repays the debt.
Pros and cons of credit lines
The advantages of opening a credit line include:
- ease of use (borrowed funds can be withdrawn in installments as needed);
- significant time savings when attracting borrowed funds;
- interest accrual only on the borrowed amount (and not on the entire credit limit);
- lack of a clear schedule for making payments (the loan agreement specifies only the repayment periods that must be observed).
A credit line for legal entities provides an opportunity to cover the necessary expenses without withdrawing own funds from turnover. Credit line for individuals It is convenient that money can be used for any purpose.
The disadvantages of a credit line include:
- the possibility of opening it only in those financial institutions where the borrower has a deposit or current account;
- dependence of the credit limit on the income of the borrower (if income decreases, the credit limit also decreases);
- short-term (the loan period in this case rarely exceeds 1 year).
In addition, to open a credit line with a large limit financial institution may require a deposit.
Important: the availability of credit funds provided by the bank under the credit line is a great advantage (every time you need to take a loan, spend time filling out documents and wait for approval from the bank) and at the same time a big disadvantage (since there is a temptation to reuse credit funds, which may lead to not fully considered purchases or transactions).
Types of credit lines
Let's take a closer look at the types of credit lines.
Framework
In this case, the bank provides the client with the opportunity to use borrowed funds for a certain period of time and within a predetermined amount to finance a specific project. At the same time, the contract specifies general terms and Conditions lending, and for each separate operation within the framework of the main agreement, additional ones are concluded. Framework credit lines are usually provided to enterprises aimed at expanding their business.
Onkolnaya
On-call (on demand) is a credit line in which the credit limit is renewed each time a part of the debt is repaid just to its size. As the loans taken earlier are repaid, the limit is restored automatically in this case (without the need to conclude additional agreements) and is determined depending on the assessment of debt obligations, which are pledged by the borrower in the bank.
Contracting
A credit line is called a credit line when opening an active-passive account, from which you can not only withdraw funds, but also replenish it. In this case, the debt to the bank is repaid automatically with each receipt of funds to the account.
Non-renewable (simple)
A non-revolving line of credit is the issuance by a bank to a client of borrowed funds, limited by a certain limit, in the form of tranches. The borrower can use the funds provided to him when he needs them, and in the manner prescribed by the loan agreement. At the same time, repayment of part of the loan does not increase the issuance limit. That is, each time the limit is reduced by the previously borrowed amount and is not restored even after it is returned in a timely manner and with interest. After the client has exhausted the entire limit, he no longer has the opportunity to use this credit line.
Renewable (revolving)
A revolving credit line is the provision of borrowed funds, the volume of which is limited by a certain limit, parts. In this case, you can repay the loan at any time during the entire loan period. As part of the loan is repaid, the disbursement limit increases. That is, if during the loan period a borrower who has already repaid part of the loan needs to borrow again an amount not exceeding the balance on the credit line account, he will be free to do this.
How to open a credit line?
In order to open a credit line, you need to contact the bank whose financial products you use. The amount, rate and terms of lending for each client are determined individually and are prescribed in the loan agreement.
In this case, the credit history of the borrower and his financial condition, as well as business reputation, are necessarily taken into account. Therefore, if you have one, you should not count on the fact that you will also be opened a line of credit. The size of the credit limit is affected by the presence of the borrower's security.
Very important in this case are the concepts of "debt limit" and "issue limit", which banks operate when opening credit lines. If you have opened a credit line with a disbursement limit, this means that the repayment of borrowed funds does not renew the lending limit, which is not always convenient for businessmen who often need borrowed funds. On the other hand, a credit line with a disbursement limit is very convenient for those who have planned to make large expenses in several stages, but want to avoid all other temptations. If you are going to make just one major purchase, then opening a credit line does not make sense: it is better to simply or any other bank.
Opening a credit line with a debt limit means that only the amount of debt is limited. That is, if you withdraw part of the funds and then return them, the credit limit will not decrease. A revolving credit limit is convenient for those who need to use borrowed funds frequently, but at the same time know how to control their spending.
Frequently asked Questions
Consider common questions on the topic.
How is a loan different from a line of credit?
A loan differs from a credit line in that in the case of a credit line, the client gets the opportunity to independently plan the debt repayment calendar, depending on the situation, while with a one-time loan, he has to do it in advance. In addition, in the case of opening a credit line, he can withdraw borrowed funds from the account many times and when it is convenient for him. At the same time, he pays interest for the use of borrowed funds only for those periods when he really uses them.
What is the difference between an overdraft and a line of credit?
Overdraft is short term loan, which the bank is ready to provide to its trustworthy clients. In practice, this looks like an opportunity to withdraw from your salary plastic card a little more funds (the size of the overdraft is determined by the bank) than it usually receives, which is very convenient in case of force majeure situations. At the same time, the client is not required to provide any proof of his solvency, except for those that the bank already has, while in order to open a credit line, you need to collect and submit a large package of documents.
It would be a mistake to think that an overdraft is: the interest on it is much higher than on conventional loans. It's just that people use an overdraft infrequently, and its repayment is usually faster (since an overdraft is always associated with current account, which is often replenished) than in the case of a deliberate opening of a credit line.
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The credit line today is quite popular among individuals and legal entities, since it makes it possible to use the borrowed funds provided to them (within the limit established in the agreement) repeatedly and when customers have such a need.
In contact with
Overdraft
it special form urgent a loan that is provided to complete settlements with counterparties in the absence of funds in the current account.
An overdraft limit is set for 12 months in the amount of 30-50% of the company's monthly turnover for bank account the main bank or all banks (at the discretion of the lending bank). Overdraft is the best trading companies. The purpose of the overdraft is to cover cash gaps.
The main advantage of an overdraftbefore all other types of lending is that the bank does not require collateral.
There are two types of overdraft:
Overdraft with "zeroing"
With this type of overdraft, debt repayment is carried out immediately after the receipt of funds to the borrower's current account by writing them off during the day, without the prior consent of the Borrower; as a rule, write-off is carried out at the end business day. For example, on 01/01/15 you are within the overdraft limit of 10,000 thousand rubles. took a loan for 5,000 thousand rubles; 01/10/15 3,000 thousand rubles were received on the company's current account; on the same day, the bank will fully write off the funds to pay off the debt on the loan.
When repaying the next amount of debt, available limit is renewed automatically within the validity period of the credit limit, without execution of any documents.
The main disadvantage of an overdraft "with zero"is that the company must constantly plan payments and in the event of a "financial emptiness of the hole" will not be able to use leverage, because. funds are debited on the day they are received in full automatically to pay off the debt on the loan.
Overdraft "without zeroing"
This type of overdraft has a so-called continuous debt period, that is, a tranche. A tranche is the period during which the company is obliged to repay the debt. As a rule, the tranche period is set for a period of 30 to 60 days, in rare cases - up to 90 days. This means that during the tranche period you use the loan funds without repaying the debt before the end of the tranche period. For example, on 01/01/15 you are within the limit of 10,000 thousand rubles. took 5,000 thousand rubles. with a tranche term of 30 days; On January 15, 2015, 5,000 thousand rubles were received on the company's current account; they are not written off by the bank to repay the loan, since the repayment period will come only on 01/30/15. At the same time, if you want to repay the loan earlier in order to save on interest, a written application for early repayment. After the loan is repaid, the next day the overdraft limit is automatically renewed.
This type of overdraft is practically the same as a revolving credit line (ON). When providing ON, the limit period can be increased up to 2 years, and the tranche period up to 360 days. Like ON, an overdraft without resetting can be provided not only to cover cash gaps, but also to replenish working capital companies.
The main plus of an overdraft "without zeroing"is that the company has leverage and is not obliged to repay the debt before the tranche date.
An example of calculating the overdraft limit
AT different banks formulas for calculating the overdraft limit may vary. In all cases, the following main criteria are taken into account:
- the number of counterparties per month (at least 10 or 20, etc.);
- the number of payments from one counterparty per month (at least 20, etc.);
At the same time, turnovers are taken into account either on all accounts of the client, or in the main servicing bank, or only in the creditor bank.
As a rule, the limit on an “incoming” overdraft (when a borrower takes a loan from a bank that does not serve him with an obligation to transfer a certain amount of turnover to this bank within 3 months) is no more than 30% with a subsequent increase.
Also taken into account are the requirements for the business reputation of the borrower and his financial condition are the same as for other types of loans.
Here is an example of calculating the overdraft limit:
L=B*P,
where
B
- average monthly receipts to the current account minus receipts of credits and loans (some banks carry out calculations based only on receipts);
P
– % of overdraft limit (not more than 50%).
In this way, maximum amount for the provided overdraft is 3,200 thousand rubles. Once again, we note that the requirements for the number of payments and receipts in each bank are different.
Credit line
allows the Borrower to use the loan within the unused limit established by the agreement. Credit lines, in turn, are divided into:
to revolving credit lines (ON) /
revolving credit lines and credit lines with an issue limit / non-revolving credit lines (NCL).
Revolving credit line
ON is an overdraft “without zeroing”. At the same time, unlike the latter, the bank will require collateral. As with an overdraft, the bank sets a debt limit and the terms of the tranche, within which the loan is issued and repaid, for the entire duration of the line opening agreement. As with an overdraft, the repayable part of the loan increases the free balance of the debt limit (the credit limit is renewed). Some banks offer a continuous debt period (tranche) on the condition that the loan period does not exceed 12 months. This means that you can within the specified 12 months. receive and repay a loan within the credit limit at any time. VKL, like an overdraft, is perfect for trading companies or organizations with a short production cycle (up to 180 days) in order to cover cash gaps or increase working capital.
ON allowsborrower to save on interest. Unlike an overdraft, here it is possible not to set a continuous debt period and increase the loan term by more than 12 months. As a disadvantage of this loan product It should be noted that there is a high one-time commission for issuing (usually from 0.5 to 1% of the amount of the limit) and providing a loan within the settlement limit (the bank determines the loan amount based on the turnover of receivables and accounts payable, terms of settlements with counterparties, the amount of annual revenue, turnover of goods or finished products).
A number of banks provide the so-called universal revolving credit line. This product is similar to a revolving line of credit with a period of continuous debt. The only difference is in the interest rates set in the applications that the borrower submits to the bank to receive the next tranche. The interest rate is not fixed, but is formed based on the situation on the financial market- it can be either lower or higher than the fixed one. It all depends on the established period of continuous debt will be set - 30, 180 or 360 days.
The shorter the period, the better the rate.
Revolving credit VTB line- this is special kind a loan that is issued to legal entities and individuals. A banking institution provides its client with money in the amount of the limit. AT this article Let's consider what a credit line is, on what conditions it is provided by banks.
A credit line, unlike a conventional loan, allows the borrower to borrow money throughout the entire period of the agreement. Depending on the terms of the provision, several types of this type of loan can be distinguished.
Non-revolving line of credit
This type of loan involves the issuance of money in installments (tranches). In fact, this is a classic loan, but issued in installments.
The bank opens a loan account for the client, on which a certain sum of money. The borrower withdraws this money at his own discretion. The agreement may provide that the money is withdrawn monthly or in any amount at the request of the client.
Usually such products are used by organizations for economic activities.
For example, a company opens a non-revolving credit line in the amount of 1 million. The organization withdraws money 4 times for a quarter of a million. After all the money is exhausted, the line is closed and the company must pay off its debt with interest, similar to a loan.
Revolving credit limit
The renewable (revolving) line provides access to borrowed funds within the limits established by the agreement, but prerequisite is the repayment of existing debt. After making a payment to repay the debt, the funds are returned to the client's account, and the company will again be able to use the loan.
Is a revolving line of credit profitable?
The revolving line is the most convenient lending for business entities. Having collected documents once and received approval, the client gets access to credit funds. By observing the prescribed limits and repaying their debts on time, companies can effectively use this type of loan.
Framework credit line
The framework credit line is directed lending. Cash is given to finance a predetermined project or purchase of certain equipment.
Often it is the targeted nature of the loan that makes such bank products unattractive to the client. However, considering enough low rates for this product, some organizations opt for it.
Specific species
You can also select a contract line. It is a special type of loan in which banking institution opens an account for his client. The borrower has the right to withdraw money at any time, and repayment of the loan occurs automatically.
This banking product allows organizations to borrow money only at the right time and pay only for certain period when the loan is actually used.
What is the difference between an overdraft and a line of credit?
Overdraft is a product similar to a line of credit.
The main differences from a line of credit are as follows:
- overdraft is available only in the absence of funds on the account. The credit line does not depend on the amount of money in the account;
- the entire amount of money received in the current account is fully debited credit institution until the full repayment of the overdraft. The credit line provides for partial repayment
- overdraft interest rate depends on the amount of funds transferred and the period of their use. The credit line assumes different kinds interest rates.
How is a loan different from a line of credit?
A loan is a one-time contract, under the terms of which a certain amount of a loan is provided at a time. A credit line involves the receipt of borrowed funds a number of times.
The line is a kind of ongoing credit.
In this regard, it is she, and not a simple loan, that companies choose to finance their activities.
A line with an issuance limit and a debt limit: the main differences
A line with a disbursement limit implies a specifically agreed amount of cash disbursement to the client. For example, it is stipulated that the borrower has the right to receive no more than 500 thousand monthly.
When concluding an agreement with a debt limit, a limit on the maximum possible debt is established. For example, a legal entity cannot borrow more than 500 thousand. Thus, at the moment when the client's debt is 500 thousand, additional funds are not issued.
Conditions for granting a credit limit
A revolving credit line assumes that the borrower uses the funds on loan within the limits established by the agreement. The limit is set in the contract.
The client must provide documents proving his solvency.
Loan currency
This type of lending can be provided both in Russian rubles and in foreign currency. To receive loans, for example, in dollars, an organization needs to open a foreign currency account.
Debt limit
The debt limit is a certain amount debt that the customer is entitled to. If this amount reaches limit value further lending is not possible.
In each case, the bank sets a debt limit.
Timing
A revolving line of credit is a long-term loan, as a rule, it is provided for a period of 5 years or more.
If the borrower fails to fulfill its obligations, the bank has the right to terminate the loan and thus terminate the term of the loan agreement.
If both parties agree, the loan agreement can be extended for new term on same conditions.
Fixed or floating interest rate
Two fundamentally different interest rates can be provided:
- fixed;
- floating.
A fixed interest rate assumes that the borrower always pays the same interest.
The floating rate consists of two parts: fixed and variable. The second part depends on the client's debt and the loan amount.
Commissions
The bank takes its commission for the use of borrowed funds by the client. Tariffs are described in tabular form.
Security
To obtain a loan in the largest amount, an organization may provide collateral. Such collateral can be:
- guarantors;
- real estate mortgage, Vehicle, goods in circulation;
- bank guarantees of other credit institutions.
How to open a credit line
To open a credit line, the bank requires borrowers to provide a certain package of documents. It varies slightly depending on the status of the client.
Legal entity
The organization must submit to the bank:
- copies of constituent documents;
- accounting and financial reporting;
- general information about activities legal entity.
Specificity for IP
The bank cannot give individual entrepreneur large line of credit. Therefore, in order to obtain a loan for an individual entrepreneur, it is necessary to provide significant collateral, as well as perspective plan further development.
For an individual
Strictly speaking, ordinary citizens cannot be provided with a credit line in the classical sense of the term. For individuals, the bank issues credit cards with similar capabilities.
Revolving credit card
It is this product for individuals that is closest to a credit line. With this card, a citizen gets access credit account. The agreement establishes the maximum limit for spending borrowed funds, as well as the maturity of the debt.
Debt repayment procedure
Debt repayment can be made in any way convenient for the client:
- through a bank branch
- by transferring from card to card;
- by using electronic services(for example, Sberbank Online);
- through Russian post offices;
- using the Golden Crown service.
When using third-party services, credit institutions may charge a commission!
How to increase the line of credit
In practice, a situation may arise when the client needs larger size lending. In this case, you can contact the bank branch with a request to increase the size of the credit line.
As an application, it is necessary to submit documents proving the solvency of the borrower.
If the application is approved, the contract will be amended accordingly.
If the bank closed the line?
If there is no payment on time, the bank has the right to close it. Often these actions credit institution cause serious harm financial stability organization client.
To resume lending, you must first pay all debts. Sometimes for this you have to take loans from another bank. After that, you can contact the bank branch with an application to open a line.
Advantages and disadvantages
An undeniable advantage compared to a regular loan is the fact that to open a line of credit, you only need to go to the bank once, collect the necessary package of documents and get access to long-term lending.
Favorable interest rate. Interest is charged only on the amount that the client takes for his needs. Such conditions allow you to save a significant amount of money.
But this species lending also has its drawbacks.
- Often, the contract provides that a one-time disbursement of funds (tranche) is small. Therefore, despite the overall large limit, at one time the client can use a not very large amount.
- Most often, collateral is required to open a line. In this regard, it is not always convenient for organizations to pledge their real estate as collateral.
Thus, each client, having studied the terms of this product, must come to the conclusion about the convenience of using this particular type of lending.
Credit- this is a bank operation to provide funds to the borrower on the terms of payment, repayment, urgency and guarantee. In a broader sense, credit is a value economic category, an integral element of commodity-money relations.
Credit line- this is the right assigned to the bank client to receive a loan within a specified time period within the established volume. Receipt of the amount according to the credit limit can be carried out both one-time and in several stages - depending on the type of credit line.
Main types of credit line:
- non-renewable- funds are issued in installments, as needed. There is a one-time debt limit.
- renewable- provides for the restoration of the debt limit to the bank, if the previously issued loan is repaid.
Pros and cons of a line of credit
The bank can provide a credit line in rubles, dollars or euros, and the maximum amount of the credit limit is determined based on the creditworthiness of the legal entity, its credit history, the annual turnover of the enterprise and taking into account its needs. Typically, 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 open for more than one year, the bank may request from the borrower enterprise adequate liquid security - real estate, vehicles, land, inventory, debtors' debts, equipment.
Most often, a credit line is provided for the duration of a major contract, or for a certain fixed period.
An important difference between a credit line and a loan is the convenience and obvious benefit for the enterprise: this type of lending allows you to significantly save on interest. Since the date of the need for money is not always known, and a credit line gives the advantage of getting a loan at the moment when it is needed and repaying it exactly when such an opportunity arises. In the case of a contractual credit line, this can even be done automatically, which allows you to bring the optimization of cost reduction on the loan to automatism.
The obvious advantage of a credit line over conventional loans is the optimization of the costs of attracting external funding and significant time savings.
Despite all the benefits and convenience of using a credit line, this bank instrument by no means free. First of all, the funds that make up the credit limit are not issued just like that, but at interest. And the percentage is usually quite high, especially for "revolving" loans (on average 20-25% and above). Instant revolving credit cards are the most expensive: they can have a percentage of 50% or more.
Often, a bank charges a fee (1-1.5% of the limit amount) for opening a credit line. The borrower also pays a commission for the reservation of funds (with a non-revolving line) and for various operations (especially a lot of "transaction costs" for holders of revolving cards).
An example of the difference between a loan and a line of credit
Khlebobulka LLC wants to purchase a new bakery line worth 10,000,000 rubles. Khlebobulka LLC, which manufactures such lines, is ready to make it to order, install the line, and train employees according to the following scheme: after that LLC Khlebnye linii starts production, which will be completed on 31.08.2012. After the production is completed, Khlebobulka LLC pays 60% of the cost of the line (6,000,000 rubles). Further, until 31.10.2012 Khlebnye linii LLC undertakes to deliver the line to the site, carry out installation, and train employees. After signing the act of acceptance and transfer of the finished line, Khlebobulka LLC transfers the last 10% (1,000,000 rubles).
Funding Scheme this project will look like this:
- 07/01/2012 - 3,000,000 rubles.
- 08/31/2012 - 6,000,000 rubles.
- October 31, 2012 - 1,000,000 rubles.
Total 10,000,000 rubles.
Khlebobulka LLC has its own funds only in the amount of 1,500,000 rubles, so it decides to take a bank loan secured by the purchased equipment. In accordance with this lending program, Khlebobulka LLC pays only the first 15%, and the bank issues a long-term loan for the rest of the amount. investment loan at 14% per annum. The loan is taken at the moment when you need to pay an advance payment, i.e. 07/01/2012. The loan amount will be equal to 8,500,000 rubles (1,500,000 - own funds, 8,500,000 - borrowed). Now let's calculate how much interest we will pay from 07/01/2012 to 11/30/2012. How to correctly calculate interest on a loan can be found in the article An example of calculating interest on a loan. When calculating, do not forget that the number of days in 2012 is 366.
If you use such a financing scheme as a loan, you will have to take the entire amount - 8,500,000 - at once. Next are two options:
- pay the supplier at once the entire amount;
- The money is just in our checking account.
The first option is not suitable, since paying for what has not yet been produced is at least impractical. The second option is also not suitable, since interest must be paid for loan money, so in this case such a financing scheme as a credit line is perfect. It is necessary to open a credit line with a disbursement limit in the amount of 8,500,000 rubles. Within this line, you can choose the limit as it will be convenient and not pay extra interest on unused credit funds. In the case of a credit line, the calculation of interest will look like this:
| Period | Number of days | Debt, rub. | Interest amount, rub. |
| 02.07.2012 – 31.08.2012 | 61 | 1 500 000,00 | 35 000,00 |
| 01.09.2012 – 31.10.2012 | 61 | 7 500 000,00 | 175 000,00 |
| 01.11.2012 – 30.11.2012 | 30 | 8 500 000,00 | 97 540,98 |
Total 152 days - 307,540.98 rubles.
