Liquidating loan self

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A line of credit establishes a maximum loan balance that the bank will permit the borrower to maintain.The borrower can draw down on the line of credit at any time, as long as he or she does not exceed the maximum set in the agreement.Generally, a borrower must have a high credit rating to receive an unsecured loan.Commercial paper is an example of an unsecured loan.These loans are intended to finance purchases that will quickly and reliably generate cash.A business might use a self-liquidating loan to purchase extra inventory in anticipation of the holiday shopping season.The advantage of a line of credit over a regular loan is that interest is usually charged only on the part of the line of credit that is used, and the borrower can draw on the line of credit at any time.

Commercial loans usually charge flexible rates of interest that are tied to the bank prime rate or else to the London Interbank Offered Rate (LIBOR).The acquisition loan is typically only available to be used for a short window of time and only for specific purposes.Once repaid, funds available through an acquisition loan cannot be re-borrowed as with a revolving line of credit at a bank.Due to expensive upfront costs and regulation-related hurdles, smaller businesses do not typically have direct access to the debt and equity markets for financing purposes.Therefore, they must rely on financial institutions to meet their financing needs.

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