Commercial Line of Credit

A commercial line of credit, also called a business line of credit, is a revolving loan that works like a credit card.

Businesses can borrow up to a credit limit, and they carry interest on outstanding funds.

These lines of credit are often unsecured, but secured LOCs exist as well.

Commercial Real Estate Line of Credit

A commercial real estate line of credit is a commercial line of credit that is secured by some form of real estate.

Often, businesses will leverage the equity in their property or building to secure this line of credit.

Secured lines of credit often offer higher credit limits and lower interest.

Commercial Line of Credit FAQs

A line of credit is money lent to an individual or business. If a line of credit is revolving, then the line of credit will replenish as the borrower pays back money borrowed.
The acronym LOC stands for Line of Credit.
A revolving line of credit is one which replenishes when the loan is paid off. An example of this is a credit card. A non-revolving line of credit closes once the loan is paid off, such as a student loan.
A loan is typically a lump sum whereas a line of credit is typically revolving which allows for the borrower to draw, repay, and again draw as needed.

Line of Credit (LOC) Definition

What Is a Line of Credit and How Does it Work? Revolving vs Non-Revolving

Lines of credit will either remain open, or will close, once the loan has been repaid.

Revolving lines of credit are considered “revolving”because an individual’s credit is replenished when some or all of the outstanding debt has been paid off.

In contrast, a non-revolving line of credit is closed once the account is fully paid off, such as a student loan or mortgage.

Non-revolving credit usually has a lower interest rate.

How does a Line of Credit Work? Secured vs Unsecured

Loans may be unsecured loans, or secured by collateral.

A home equity loan is an example of a collateralized loan, whereby the home is the collateral and will be claimed by the creditor in the event of a default on the loan.

Credit card loans are almost always unsecured, which causes creditors to take on more risk and is why credit card interest rates are generally higher and the borrowing limits are generally lower than secured loans.

Understanding a Credit Line FAQs