If an entrepreneur has only one lender, the business becomes dependent on him. In crisis situations, this can slow down the development of the company.
For example, a lender may refuse money or offer unfavorable conditions. Therefore, it is better for a business to have several lenders in stock – when money is urgently needed, there will be plenty to choose from.
Loans can be taken not only from banks. A large business, for example, can enter an IPO and issue shares and bonds. Small businesses more often use loans, loans from individuals and legal entities, and lines of credit.
A line of credit is a special type of lending where the lender approves a limit of money available to the borrower within this line within the period specified in the agreement. So the client may not take all the money at once, but withdraw it in parts until the end of the contract. At the same time, he does not have to “spend” the entire limit.
For example, the bank approved a credit line of 10 million rubles for a period of 3 years. The borrower can take, for example, only 6 million rubles – and pay interest only on this amount.
