How can a Business Apply for a Line of Credit?
What is a line of credit? It is in effect a loan offered by a bank or similar institution. It is not a straight loan credited to your account. It is an agreed amount set for a specific repayment date. It can be drawn down in tranches, or the full amount. It will depend on the agreement signed with the lender. There will be an interest rate attached to the line of credit.
How to Apply for a Line of Credit?
As is usual with banks there will be much paperwork to fill out and sign. Usually the company applying for a line of credit will have an account with their bank. They will have to advise what the line of credit is for in their application form. This will be supported by a business plan containing a decent exit strategy.
The bank will look at the company’s trading history. They will confirm the line of credit will be utilised in line with their trading history. The applicant may wish to borrow away for their core business. This will have to be explained in the expected business plan.
Most lenders today will demand security before approving a line of credit. You may have the best business plan on the planet. The bank however may feel the balance sheet does not support the line of credit. Accordingly, the bank will decline the application.
Now this is the interesting bit. How does a company get a line of credit without security? Easy! They obtain the necessary security. To find out more, keep reading.
Demand Bank Guarantees
Demand Bank Guarantees are specifically designed to be monetised. The verbiage contained within is precise and exact. Most lenders will be happy to lend against a Demand Bank Guarantee having read the verbiage. Furthermore, it is governed by ICC Uniform Rules for Demand Guarantees, (URDG 758). It is payable on first demand.
How do I get a Demand Bank Guarantee?
Demand Bank Guarantees are leased by companies know as providers. These companies are recognised as Hedge Funds, Sovereign Wealth Funds and Private Equity Funds. They will lease this instrument to a company wishing obtain the Demand Bank Guarantee. This company becomes the beneficiary.
The agreement between the provider and the beneficiary is known as a Collateral Transfer Agreement. Once signed the provider will swift the Demand Bank Guarantee to the beneficiary’s account. The beneficiary can now apply to their bank for a line of credit. The Demand Bank Guarantee will act as the security.
For an in-depth look on Providers, Demand Bank Guarantees, Bank Guarantees and Swift, please use the information we’ve provided on our site or get in touch.
IntaCapital Swiss SA Geneva
IntaCapital Swiss have successfully been providing access to loans and lines of credit for over a decade. Their most popular product is the Collateral Transfer Facility. They have on their books a cross-section of providers.
The Collateral Transfer Facility allows providers and potential lessees of Demand Bank Guarantees to agree a Collateral Transfer Agreement. This allows the beneficiary to access a loan or line of credit.
So for all you companies without security but need a line of credit please get in touch with IntaCapital Swiss.