1. What is a line of credit? 2. what is a revolving credit agreement?

1. What is a line of credit?

2. what is a revolving credit agreement?

Expert Solution

Line of credit:

It is a loan amount offered by lender to its borrower. This loan or credit limit is set up by lender according to risk profile of borrower. Borrower has option to utilize the limit as and when it is required. Borrower can utilize entire limit or partial limit on ongoing basis. Borrower has option to repay the borrowed amount at ay point of time. Borrower can choose to pay only minimum amount or interest amount on borrowed amount. This credit line or limit gives huge degree of flexibility to the borrower.

Revolving credit agreement:

Revolving credit agreement is credit line set up by lender for borrower. Along with interest lender may charge commitment fees to borrower for setting up such limit. Revolving credit facility is similar to line of credit. Revolving credit agreement has flexibility for borrower to withdraw amount as per requirement and flexibility to repay it any time.

jeff jeffy answered 2 years ago

Compare and contrast an informal line of credit with a revolving credit agreement.

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