Standby Line of Credit


DEFINITION of 'Standby Line of Credit'

A sum of money, not to exceed a predetermined amount, that can be borrowed in part or in full from a credit granting institution if the borrower needs it. In contrast, an outright loan would be a lump sum of money that the borrower intended to use for certain.

BREAKING DOWN 'Standby Line of Credit'

A business might establish a standby line of credit with a financial institution in situations where the business needed to guarantee its ability to pay a certain amount of money to a client if the business fails to fully perform on a contract. In this situation, the standby line of credit would act as a performance bond. The standby line of credit might be used as a backup source of funding in case the primary source fails.

  1. Consumer Credit

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  2. Letter Of Credit

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  3. Open-End Credit

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  4. Revocable Trust

    A trust whereby provisions can be altered or canceled dependent ...
  5. Revolving Credit

    A line of credit where the customer pays a commitment fee and ...
  6. Line Of Credit - LOC

    An arrangement between a financial institution, usually a bank, ...
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