Credit line is the total amount determined by the bank Money, which he provides for a certain period of time in parts. The term of the contract, the possibility of obtaining funds, the calculation of payments are stipulated in the contract between the borrower and the credit institution.
There are two main areas:
- Non-revolving line of credit- it's strict limited size cash with tight time frames that cannot be extended, changed, even if the borrower manifests himself as a solvent client. This kind loan agreement beneficial to those who do not expect to constantly replenish the turnover of funds at the expense of the bank's funds;
- Revolving credit line allows the borrower to receive funds from the bank again and again when repaying parts of the debt, compliance with the contract. This type of lending helps to constantly replenish the stock of funds, it is especially beneficial for novice businessmen, unplanned purchases. In addition, such interaction with the bank allows you to significantly save on interest.
A line with an issuance limit and a debt limit: the main differences
Setting limits on a credit line with a withdrawal limit limited to the total amount borrowed by the borrower in total. Even if part of the debt is closed, the limit will not be replenished. So this line can be safely attributed to non-renewable.
Line with a debt limit allows for partial repayment of the previous debt, within the agreed limit.
Is a revolving line of credit profitable? What does she represent?
The revolving line of credit is not strictly limited. Here the client credit institution can take funds over a long period of time funds again (from 5 years) if you replenish the limit in a timely manner, following the rules.
This type lending can be classified as profitable, because the commission is charged for actually used finance. Therefore, at the output, the total amount of debt is much less than the usual "lump" loan.
In addition, there insurance revolving line of credit when money is paid to an enterprise, a person as needed.
But, as in any agreement, you must comply with all the conditions, replenish the limit at the time, follow the instructions of the bank. He must give you, as a borrower, funds at your first request within the established limits.
What is an open line of credit?
An open credit line is considered to be any valid one whose limit and term have not yet reached the limit. By opening it, the client assumes, has the right to take funds for his own needs within the established limits. He can repay the debt, as in short time, and more slowly, forming a residual debt.
Line for legal entities: when and how?
The credit line itself is provided only to legal entities, individual entrepreneurs, whose activities are of an official nature.
Like any other bank, Sberbank provides this service. You can count on a credit line from Sberbank organization older than one and a half years, is financially stable, has a reputation and trust in the service sector market.
The decision to provide the service is provided by the management of Sberbank, which considers the application in a short time. The term and limit are also determined by management. Standard line term - from six months to one and a half years, but may be wider if desired and depending on the circumstances.
Renewable line from VTB24: features
VTB24 Bank provides a revolving line of credit to its customers. The decision to provide a service is based on various factors: solvency, reputation and features of the loaned object.
The client himself has the right to choose the type of interest rate - variable, fixed. In order to convince a credit institution of its solvency, a legal entity can provide - a package valuable papers, any real estate to which he is entitled, a guarantee (guarantors)
Specificity for IP
Like any other organization, individual entrepreneur is eligible for a line of credit. It is more beneficial in financial terms, because it allows you to receive finance not in a single stream, but in receipts that help regulate capital and solve tasks.
Duties and rights are specified in the contract. The individual entrepreneur is obliged to replenish the limit in time, to comply with the prescribed conditions.
What is the difference between an overdraft and a line of credit?
Overdraft is considered quick receipt borrowed money in a short time at the first request of the client. The limit is replenished automatically by debiting funds from the personal account, while repaying the credit line requires self-repayment of the account specified in the agreement.
Overdraft is great for large trading companies that have a large money turnover. The limit here is also set depending on the working capital and the client's capabilities. Simple line of credit suitable for sole proprietors and medium-sized enterprises.
How are interest calculated?
There are several ways to calculate the interest rate on a credit line, which are determined individually depending on the type of agreement.
Interest may be charged:
- For the entire limit. That is interest rate determined in total. For example, P.I. Ivanov took 250,000 rubles with an annual interest rate of 12%, the total will be 280,000 rubles;
- For actual funds used. The limit of P.I. Ivanov is 250,000 rubles, but he took only 50,000 rubles at a rate of 12%, therefore, 56,000 rubles.
The rate can be:
- Fixed. Framework credit line was taken as part of 12% for 5 years, it will not change until the end of cooperation;
- floating, which will change throughout the life of the credit line.
What kind of interest rate is right for you, you need to decide based on your financial capabilities and goals.
If the bank closed the line?
He can do this if he does not comply with the condition, the expiration of the term of cooperation. In this case, you can re-apply for an extension of the contract, and if you have shown yourself well to the bank, the likelihood of opening a credit line is high.
How is a loan different from a line of credit?
A loan is a one-time payment by a bank of funds in debt without a limit, the possibility of obtaining additional funds. The credit line allows replenish the stock of funds- in parts within the specified limit and period.
Receiving funds in parts in most cases is an advantage that allows you to replenish the stock in time with the balance of funds.
How to increase the credit line?
Each client has the right to apply for limit extensions. To do this, you need to come with the appropriate application to the bank. VTB 24 Bank will be guided by your financial capabilities, reputation, cash flow, and if they correspond to the above amount in the application, it will definitely approve the application.
You can find out about the limit, how to make an application, by calling the credit institution by visiting the office.
About the difference between line and video limit
Using the SEB bank card as an example, it is explained what is the difference between a limit and a line, it is told who suits one or another option.
Credit line- this is the right granted to the company once or periodically to use borrowed funds in the bank. Such a service has a number of limitations: you can use the funds only within the agreed limit and only for a certain period. The conditions for opening a credit line will depend on financial condition borrower and will be specified in the loan agreement. This type of lending allows entrepreneurs not to withdraw funds from circulation, but to eliminate financial gaps by applying to open lending limits. The credit line allows you to independently determine the payment calendar and thereby reduce interest costs. Receipt of the amount (within the credit limit) can be carried out both immediately and in in full, and as needed and in parts - depending on the type of credit line. non-renewable credit line (with withdrawal limit) implies the provision of borrowed funds in parts (tranches) within due date and credit limit (issuance limit). In this case, the borrower can use credit funds at a convenient time for him in the manner prescribed by the loan agreement. Repayment of part of the loan does not increase the disbursement limit. renewable credit line (with debt limit) implies the provision of funds in parts (tranches) within the established period and credit limit (debt limit). Repayment is made at any time during the crediting period. At the same time, the outstanding amount of the principal debt cannot exceed the established debt limit. The part of the loan repaid by the borrower increases the debt limit. That is, with a non-revolving credit line, the amount of all tranches cannot exceed the amount of an open credit line. With a revolving credit line - the amount of all tranches may exceed the amount of the open credit line due to the repayment of previous tranches. In other words, with a non-revolving credit line, the borrower can take a tranche (or several) that does not exceed the limit, and after repayment, the line is closed. When revolving - the repayment of one tranche increases the limit of available funds, and you can take it again and again (within the credit limit and within a certain period). There is only a time limit for the return of each tranche (usually no more than 3 months). An example of using a non-revolving line of credit. The borrowing company is set credit limit in the amount of 1 million rubles. He took three tranches: the first - in the amount of 500 thousand rubles, the second - in a month in the amount of 200 thousand rubles, the third - in another month in the amount of 300 thousand rubles. After the last tranche, the client has reached the limit and can only repay the credit line. Even if the client repays half of the debt - 500 thousand rubles - he will no longer be able to use the credit line, since he had already reached the issuance limit earlier. An example of using a revolving line of credit. The debt limit is set at 1 million rubles. The borrower took the first tranche - in the amount of 700 thousand rubles - after which 300 thousand rubles are available to him (1 million rubles - 700 thousand rubles). Later, he repaid part of the debt - 500 thousand rubles - and now 800 thousand rubles are available to him (1 million rubles - 700 thousand rubles + 500 thousand rubles). That is, the borrower can take as many times as he likes, with only one condition - at any given time, his debt should not exceed the established limit. However, the bank may charge a commission for unused debt (in our example, after the first tranche, a commission in the amount of 300 thousand rubles will be charged). So the bank encourages the borrower to collect the entire amount of debt as soon as possible. Also, with a revolving credit line, it sets a deadline for the return of each tranche. And if the credit line is open for 1 year, this does not mean that the tranche may not be repaid during this period. The term of its return, as a rule, does not exceed 3 months.
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.
Credit line- this is a legally executed obligation of the bank to issue a loan to the client in a certain amount within a specified time. A credit line differs from a one-time lending in that the client can receive a loan more than once on some day specified in the agreement, but when he needs it, in parts.
Credit lines in banking practice are usually divided into several types.
A simple (non-revolving) line of credit involves the establishment of an issue limit, when the borrower is given the opportunity to take money once during a certain period. That is, in the case when the client needs it, but only at a time. Suppose a company plans to purchase the necessary equipment. She enters into a loan agreement with the bank, they open a credit line for her. The company is looking for the best supplier. And while she does this, no interest is paid on the loan - because the loan has not yet been taken. As soon as the company enters into an agreement for the supply of equipment, it pays for it by receiving a loan under a credit line - and begins to pay interest on the use of the loan. Suppose that the deal is concluded, the equipment is delivered, the company begins to repay the loan to the bank. Debt is reduced, but this does not increase the credit limit. That is, you cannot take the money that has been paid to the bank again.
A revolving (revolving) credit line is a lending scheme that allows the borrower to receive funds periodically as needed within a predetermined limit, repay the entire amount of the debt or only part of it, and re-borrow during the term of the credit line. Imagine a trading company that periodically buys products from other firms. As it sells, it makes new purchases. But by selling products, she receives money for it, which comes to her current account and reduces the amount of debt. When required, the company again takes out a loan to replenish its range. At the same time, she pays only then and only for what she owes to the bank at every single moment of her activity.
A framework credit line is a loan opened by a bank on the terms of a single agreement, under which payment is made for several related deliveries or financing of a certain project. The contract spelled out general terms and Conditions lending. And for each individual operation is supplementary agreement within the main.
On-call credit line means such a crediting scheme, in which the repayment of a part of the debt restores the credit limit for this amount. Let's say a bank has provided a company with an on-call credit line for one million rubles. Of this amount, the company took half, five hundred thousand. Then she can take the same amount. But, suppose, the money was not required, but on the contrary, it was possible to return the first loan. Then the company again has the opportunity to take the entire million.
A contractual credit line is a loan in which the bank opens a single active-passive account for the client, from which loans are taken and automatically repaid upon receipt of funds. Thus, the company has the opportunity to borrow money at the right time and pay only for the period when the loan is actually used.
In addition, in agreements with banks, two more concepts related to the provision of credit lines are often used. These are, firstly, credit lines with a disbursement limit, when the total amount of disbursed funds is limited. The return of money does not increase the lending limit, that is, in fact, such a loan belongs to the category of non-renewable. And, secondly, the so-called line of credit with a debt limit - the total amount of debt is limited. If the company returned part of the money, then the volume of lending is restored. Hence, it is a revolving line of credit.
In general, the provision of a credit line is more than convenient way obtaining loans for clients, allowing you to use the loan when required, and pay for it only for the period when it is taken out. It is no coincidence that the banks themselves use just such a scheme in their relations with each other: they set limits on each other. And within these limits, they manage their current liquidity - they lend money and, conversely, place free balances.
A credit line is a formal agreement between a bank and its borrower. According to the document, the bank undertakes to provide its client with financial loans within a certain time interval, within the established credit limit.
A bank's credit line differs from other types of lending not only in the multiplicity of payments. Borrower with reliable financial support, has the right to repay debts within a certain period and at the same time not pay interest on the use of the credit tranche.
This type of lending is actively used to strengthen one's business, but is also used to individuals(for owners). Convenient system payments, comfortable conditions for repayment, multiple opportunities to receive cash make the credit line more and more in demand.
The conditions for opening such a line in a bank are selected strictly individually. The main requirement: financial security and the possibility of full repayment of loans. The better financial position borrower, the higher the chance of obtaining loans on the most favorable terms. The same principle applies here as with other types of accreditation: lower bank risks - lower interest rate and more attractive conditions.
Types of credit lines
A bank credit line can be of several types:
- renewable (revolving);
- non-renewable (simple);
- framework;
- current account;
- oncol.
Framework credit line refers to the target group of loans. It is used for a one-time receipt of material resources for a specific supply of products and is limited to one contract. It is the least popular just because of the intended purpose.
Contract line- this is a loan in which the bank opens an account for its client, the latter can withdraw money from it at the right time, and repayment occurs automatically when replenishing. This enables companies to borrow at the right time and pay only for a certain period when the loan is actually used.
Oncol type accreditation means the possibility of restoring the credit limit by repaying the debt obligation. For example, a bank approved and credited half a million rubles, but a person cashed out only a part and was able to return it. Then it will recover to 500 thousand again and the company will be able to use it in the right amount.
Revolving credit line (revolving)
The most popular type of accreditation used in business. Especially relevant for those activities that depend on the seasons. The definition of a revolving line of credit means the conclusion of an agreement on the provision of a loan with the designation of a certain financial limit of debt. The agreement regulates the relationship between the client and the creditor bank, agrees on the possibility of such actions as additional credit and early repayment.
Such a credit line can be issued for a year with a further extension. The optimal solution for organizations that need financial support during certain seasons. For example, for agricultural enterprises, when an enterprise needs tranches not on an ongoing basis, but seasonally. The advantage of this form of accreditation is that there is no maximum limit on the amount of receipt itself, since the limit applies only to the balance of the debt itself.
A revolving line of credit is used by banks to lend to individuals when issuing credit cards, which are so popular today. The credit card holder can use the bank's money as much as he likes within the limits of the credit limit provided to him - it is enough to replenish the cards for a certain amount (not necessarily the entire loan), as the credit limit will immediately increase by the amount of this replenishment. This can be done indefinitely. Moreover, the cardholder has the opportunity to use the loan for free if he managed to repay the entire amount of the loan within .
Credit cards that provide such opportunities are called renewable or revolving.
Non-revolving line of credit (simple)
A simplified version of the revolving line, when an agreement is concluded on the possibility of opening a one-time credit line. According to the terms of receipt, including the limit on one-time debt, there are no differences from the revolving one. However, the difference is significant and lies in the fact that debt repayment cannot restore the credit limit. That is, if the company used the amount, in tranches or one-time, it can repay the debt, but will not restore the right to reuse the same loan.
This form is used more often by large enterprises that do not need periodic infusion of finance to revitalize the business, but large sum for the purchase of some equipment for the enterprise.
Less common are credit cards with this form of credit line (non-revolving or non-revolving).
Line of Credit Limits
There are credit lines with a total debt limit and with an issue limit.
Credit line with total debt limit implies a generalized amount of the entire debt, having paid off which the client has the right to use loans further. In this case, if the borrower returned part of the money, then the volume of lending is restored. So it's a revolving line of credit
Credit line with disbursement limit- the total amount of all loans that the client can receive for the entire time he uses the credit line. Here, the returned money does not increase the credit limit. Therefore, this credit line is categorized as non-revolving.
Credit line. Credit limit
A credit line is understood as the right of the borrower to receive from the bank and use funds within a certain period of time within the maximum amount (limit) agreed by the parties loan funds, which can be provided to the borrower (issuance limit), and (or) within the maximum amount of the borrower's one-time debt to the bank (debt limit).
The conditions and procedure for opening a credit line are determined by the bank and the borrower either in a special general (framework) agreement/agreement, or directly in the agreement for the provision (placement) of funds. The condition for opening a credit line may be contained in the loan agreement. The fact that the loan amount is determined by setting the credit line limit in the agreement and the conditions for applying for the transfer of the next tranche of the loan does not entail the recognition of the loan agreement as not concluded (clause 12 of the information letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated September 13, 2011 N 147). In other words, it is not necessary to conclude an agreement on opening a credit line separately from the loan agreement.
The period for which a credit line is opened, the issue limit, the debt limit are determined in the agreement (agreement) between the bank and the borrower.
Attention
An agreement on opening a credit line, unlike a loan agreement, does not define a specific loan amount that the bank undertakes to provide to the borrower, but maximum size(limit) of funds that the borrower is entitled to use during the term of the contract.
The agreement on the provision of a credit line is essentially a framework agreement (Article 429.1 of the Civil Code of the Russian Federation), since it determines only the general conditions for the obligations of the parties arising in connection with the provision of credit funds to the borrower, while the specific amount of the loan within the lending limit is determined on the basis of the borrower's application executed by the bank.
In practice, such types of credit lines as revolving, non-revolving and framework have become widespread. These terms are reflected, in particular, in the Regulations for the provision of loans to legal entities by Sberbank of Russia and its branches dated 08.12.1997 N 285-r (approved by the Committee of the Sberbank of the Russian Federation for the provision of loans and investments, hereinafter referred to as the Regulations).
Revolving in the said Regulations means a credit line, in which the issuance and repayment of the loan is made within the established limit of issuance during the entire term of the agreement on opening a credit line, while the balance of the issuance limit is increased by the amounts of parts of the loan (tranches) received by the borrower in within this credit line and returned to the bank by them. A revolving line of credit is usually opened to a borrower to carry out regular financial and business operations (usually, these are trade enterprises), as well as to cover the general gap in payment turnover industrial, agricultural and transport enterprises.
When opening a non-revolving line of credit, the loan is issued within the established limit, while the repaid part of the loan does not increase the free lending limit. A non-revolving credit line is opened to make various payments related to one contract or consignment of goods (for example, to pay for customs clearance, transshipment, transportation and other expenses).
Finally, a framework credit line is opened to the borrower to pay for individual deliveries of goods under one contract implemented over a certain period, or to lend to targeted programs of the borrower. For each delivery (or stage target program) a separate loan agreement is concluded within the framework of the general agreement on opening a framework credit line (clauses 1.5.2 - 1.5.4 of the Regulations).
That is, in fact, the general agreement on opening a framework credit line provides for the obligation of the bank to conclude a loan agreement (or agreements) with the borrower at his request for an amount within the issuance limit.
Often, a bank charges a separate fee from the borrower for opening a credit line. A fee (commission) is often set for other actions related to opening a credit line, for example, for maintaining a credit line limit, etc. However arbitrage practice considers the question of the legitimacy of including in the loan agreement the conditions for such payments from the point of view of whether they are established for the provision by the bank of any independent service to the client. If the corresponding fee (commission) established in the form of periodic payments does not create any beneficial effect for the borrower, that is, it is not actually a fee for the service, the courts regard it as an element of the fee for using the loan. If the commission is charged in the form of a lump-sum payment, but is not a payment for an independent service provided by the bank to the borrower (such, for example, a commission for opening a credit line), the courts recognize the condition of the loan agreement on the payment of the commission as null and void, and the funds received by the bank in the form of such a commission - unjust enrichment of the bank, which is subject to return to the borrower (Resolutions of the Presidium of the Supreme Arbitration Court of the Russian Federation dated 03/06/2012 N 13567/11, Third AAS dated 06/29/2012 N 03AP-1759/12).
In relations with an individual borrower under an agreement consumer credit the concept of "credit line" is not used, however, the legislation provides for such relations in essence the similar term "credit limit", which means maximum amount funds provided by the lender to the borrower, or the maximum amount of the borrower's one-time debt to the lender under the consumer loan agreement, under the terms of which the borrower is allowed to partially use the consumer loan. In case of concluding a consumer loan agreement with a lending limit, the condition for such a limit and the procedure for changing it must be provided for in the individual terms of the agreement agreed upon by the bank and the borrower (clauses 1, 4, part 1, article 3, paragraph 1, part 1 9 article 5 federal law dated December 21, 2013 N 353-FZ "On consumer credit (loan)", hereinafter referred to as the Consumer Credit Law).
If a consumer loan agreement is concluded with a credit limit condition, and during the previous month the borrower's debt amount changed, the bank is obliged to send the borrower the following information to ensure access to such information:
The amount of the current debt of the borrower under the contract;
Dates and amounts of payments made for the previous month and the forthcoming payment of the borrower under the agreement;
Affordable consumer loan amount with credit limit.
Information is provided in the manner prescribed by the consumer loan agreement, but at least once a month. The borrower can receive such information from the bank and on his own initiative. Once a month, this information is provided to him free of charge and any number of times - for a fee. The same rules apply to consumer loan agreements, under which creditors can be not only banks, but also other organizations that are entitled to exercise professional activity for the provision of consumer loans, in particular, microfinance organizations, pawnshops and credit cooperatives (
Depending on the rate of price growth, moderate (creeping), galloping and hyperinflation are distinguished.
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