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Commercial Line of Credit

A commercial line of credit is another name for a business line of credit. This is a line of credit that a lender makes available to businesses to fund their activities.

A commercial line of credit can take several forms. The most common is a checking or cash line of credit. This is a line of credit attached to a business’s checking account. It is usually used to cover checks and payments to make sure that the account doesn’t become overdrawn when the funds in it are low.

Many businesses have lines of credit can be used to cover the cost of day to day operations. These may make direct infusions of cash to the bank’s checking account. Businesses are also able to access these lines of credit through credit cards.

Commercial Lines of Credit and Credit Cards

Many commercial lines of credit come with a credit card attached. The credit card enables the business owner to easily access the line of credit at any time.

Quite a few businesses pay all or most of their expenses with credit cards for accounting purposes. The monthly credit card statement gives the business an easy to read list of expenditures. All the business owner or manager has to do is look at the list to see what was spent.

Many larger companies issue their employees credit cards that they use for company purposes. Some companies allow employees to pay for personal expenses with the credit card if they agree to reimburse the company.

Other Commercial Lines of Credit

There are several other commercial lines of credit available. One of the most common is vendor credit which can take two forms.

A vendor may supply a firm with inventory without payment if the customer agrees to pay the vendor back when the products sell. This is a very common kind of credit in the retail business.

Some vendors may also make cash lines of credit available to customers. This is often done to keep customers in business or to help startups.

In franchise operations, the franchise company may extend credit to franchise holders to keep them in operation. To get this credit the franchisee will have to stick to the franchise agreement they signed when they bought the franchise.

Hard money lenders are direct lenders that often operate online. They will extend hard money to businesses at high interest rates to help them cover their operations. Hard money lenders sometimes make commercial lines of credit available.

Equity Commercial Lines of Credit

Another popular commercial line of credit is equity or private equity credit. In this credit the borrower puts up collateral to secure the line of credit.

The most common equity credit is lent on equity in real estate which functions like a home equity loan. The money is borrowed against equity in a piece of property the business owns. The lender has the right to foreclose on the property if the business doesn’t pay.

Equity loans are also made against equipment, inventory and accounts receivable. Factors and other lenders may make lines of credit available if a business surrenders inventory or other property for the equity lender to hold.