GD Accounting Glossary
Glossary › Line of Credit

Line of Credit

A pre-approved borrowing limit drawn on as needed — interest only on what's used. A cash-flow buffer.

A line of credit lets a business borrow up to an approved limit, draw down and repay flexibly, and pay interest only on the outstanding balance.

It suits timing gaps — covering payroll while receivables land — rather than funding ongoing losses. Arranging it before it\'s needed is the trick; banks lend most readily to those who don\'t urgently need it.

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