Credit lines are typically used to finance day to day operations of a business, such as inventory, receivables and day to day expenses. Credit lines will have a maximum loan amount established and the balance will go up and down as the business makes payments and withdrawals from the credit line facility. The business will generally be required to make monthly interest payments on the outstanding amount. Alternatively, a term facility is used by businesses to finance fixed capital assets such as equipment or real estate. Term facilities typically require fixed payments of principal and interest over a specified term. These payments ensure that the balance is repaid over a predetermined timeframe.
