Which is more advantageous: a line of credit or a working capital loan? What is the difference between the two types of credit?
Both types of credit provide the necessary funds:
➤⠀current expenses;
➤⠀refinancing other credits;
➤⠀payment of debts to the budget and suppliers;
➤⠀or the financing of stocks of goods and raw materials.
The difference is in the way it works:
➤⠀line of credit is linked to current accountand repayment is made from cash receipts on the current account.
The credit limit is revolving: i.e. any amount used can be repaid and then used again and extended at maturity.
➤⠀Another advantage of the credit line is that interest is calculated daily on the amount used only.
➤⠀credit for working capital is (usually) granted for one-off needs, covering an expense greater than the company's current receipts.
From the outset, a repayment schedule will be established for the amount borrowed, either in equal monthly instalments or by mutual agreement. 📉