What is more advantageous: a line of credit or a working capital loan? What is the difference between the two types of loans?

Both types of credit make the necessary funds available:

➤⠀current expenses;

➤⠀refinancing of other loans;

➤⠀payment of debts to the budget and to suppliers;

➤⠀or financing of merchandise stocks and raw materials.

The difference is given by the mode of operation:

➤⠀line of credit is connected to current account, and the reimbursement is made from cash collections into the current account.

The credit limit is of revolving type: that is, any used amount can be repaid and, subsequently, used again and at maturity it can be extended.

➤⠀another advantage of the line of credit is that the interest is calculated daily only on the amount used.

➤⠀credit for working capital is usually granted for specific needs, covering an expense greater than the current revenues of the company.

From the beginning, for the borrowed amount, a repayment schedule will be established, either in equal monthly installments or agreed upon mutually. 📉