The credit line with an issue limit is determined as the sum of a general limit of the proceeds of credit which issue is produced in parts and under a drawing which is in advance agreed with the client. It means that there will be a funds transfer on the settlement account of the client (borrower) and also their use during the term specified in the agreement, but thus the issue limit established by the credit agreement shouldn’t be above a total sum of all before the given out tranches.
As tranche is the certain amount of loan which is given out to the borrower in the form of one part from the credit. This kind of crediting is especially convenient for procedure of financing of the transaction which assumes delivery of the goods by several batches or if the transaction is carried on time for payments.
The credit line with an issue limit can be opened on following purposes:
On acquisition of such assets as buildings, the equipment, motor transport, boats which serve for expansion of production volumes;
On replenishment of circulating assets of the enterprise, on fee, acquisition of the goods and a material, on a payroll payment and taxes;
Repayment of such category of credit is produced under a certain schedule which is in advance agreed the client and constituted with accounting of the schedule of issues.
The basic advantage of such kind of crediting consists in that the client gets access to proceeds of credit in terms in advance caused by the agreement and in the established volume of a limit of issue. Also, if the client doesn’t have requirement for proceeds of credit, he has the right to refuse issue of the next tranches.
Thus the client has the right to use proceeds of credit in term convenient for it in an order established by the credit agreement. If the borrower has extinguished a credit part it doesn’t increase an issue limit.
High lights of the agreement on granting of a credit line with an issue limit:
1. A subject of agreement. Here it is underlined that the bank opens for the borrower a credit line with an issue limit for term specified by this agreement with granting to the borrower of the credit separate tranches and the borrower undertakes to return the credit in the provided term and to warrant credit use on a special-purpose designation and also to pay to the creditor percent for credit use;
2. The purpose of opening of a credit line. In this point the borrower is underlined, on what purposes there will be a used credit;
3. An issue limit;
4. An order of granting of tranches. In this point are such key points specified conditions of granting of tranches, the sum of a lump sum levied from the creditor for using a credit line and documents which the borrower is obliged to give to the creditor where the conditions confirming target use of the credit;
5. A credit period. Here maturity date of the credit and duration of the agreement is established;
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