Line of credit

A bank facility a borrower can draw on up to a limit as needed. A committed line obliges the bank to lend, for a fee; an uncommitted one can be withdrawn at the bank's discretion.

Where you will meet it

Line of credit appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Contrast the short-term financing options open to companies and to financial institutions
  CFA Level I · Fixed Income

  “Companies can draw on bank lines of credit, which may be uncommitted, committed with a fee, or formal multi-year revolving credit agreements.”

• Set out where firms can raise short-term funds
  CFA Level I · Corporate Issuers

  “A committed bank line of credit provides certainty for a fee; an uncommitted line does not and can be withdrawn precisely when it is needed.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with L · Glossary