Line of Credit (LOC)
Line of credits can be secured or unsecured. Accounts receivable and inventory financing (ARIF) is the most fundamental form of “collateral-based” commercial lending. It combines elements of secured lending and short-term business loans. In its purest form, commercial borrowers use the value of their receivables and inventory (working assets) as collateral to secure financing to produce and market their products and services. The financing is then repaid by converting the inventory to cash, either directly or through the collection of an accounts receivable invoice.
Lines of credit can be broken into five broad categories of lending:
- Asset Based
- Blanket Lien Secured
The established line of credit definition lists this type of financial arrangement as a revolving loan that provides ongoing funding for businesses. A typical line of credit features a set spending limit; as businesses repay the funds they have already use, the available credit increases until it reaches its original amount. Businesses can obtain lines of credit from vendors and suppliers to allow them to purchase goods more easily and conveniently. This can provide valuable financial flexibility when waiting for payment from customers, clients and others who owe the business sums of money. Commercial lenders also provide line of credit loan arrangements to businesses to be used for a wide range of expenses and emergency financial needs. These arrangements are popular due to their flexibility and the ease of use they represent for smaller businesses in managing cash flow difficulties and short-term shortfalls more effectively.
CNF Exchange offers a number of benefits for lenders and for small business owners. Lenders can readily find qualified borrowers to diversify their investment portfolio. For borrowers, the Investor Exchange platform provides an easy-to-use way to upload one application and receive a number of funding proposals from lenders interested in providing a line of credit suited to their specific business needs. This creates a win-win situation for both parties to the transaction and can provide valuable financial flexibility for small business owners. By seeking line of credit loan arrangements through the CNF Exchange online interface, small businesses can often obtain the funding they need to manage their financial situations more quickly and conveniently.