What is a 'Swingline Loan'

A swingline loan is a financial loan made by a banking institution. The loan grants organizations access to large amounts of cash to cover possible shortfalls from other debt commitments. It is seen as short term, operating for no more than five to 15 days on average, and is also a form of revolving credit that can be drawn upon as needed.

BREAKING DOWN 'Swingline Loan'

The purpose of a swingline loan is to provide cash quickly that can be used to cover other debt obligations. While a swingline loan is similar to other lines of credit in function, the funds provided by this type of loan are only to be used for paying other debts and not for other purposes such as asset acquisition or product research. This differs from a traditional line of credit that can be used for any purpose, including the purchase of goods or services along with debt repayment.

You could compare a swingline loan to a traditional line of credit or demand loan, as a swingline loan gives companies immediate access to large sums of cash on short notice just like the other options, but the use of the funds are more restricted than through the other mechanisms. Swingline loans are best suited for use in times where normal processing delays make other forms of loans less ideal.

Swingline loans may be acquired by both businesses and individuals. For individuals, a swingline loan may serve a similar function to a payday loan, providing cash quickly but often at higher interest rates than other forms of credit. For businesses, they are most often used to cover temporary shortfalls, such as when anticipated incoming funds have been unexpectedly delayed.

Revolving Credit

Revolving credit involves a loan or line of credit that can be used repeatedly. Though it normally has an upward limit, as long as the funds are paid back as agreed, they can be withdrawn as needed on very short notice. Often, funds can be received on the same day they are requested, and the cycle of repayment and withdrawal can continue as long as all conditions of borrowing are met and both parties choose to keep the line open.

Revolving credit lines can be closed at the discretion of the borrower and the lender. This allows lenders to close lines of credit that have experienced elevated risk, or borrowers to close accounts they no longer intend to use.

RELATED TERMS
  1. Facility

    A formal financial assistance program offered by a lending institution ...
  2. Loan Commitment

    A loan commitment is a loan that may be drawn down or is due ...
  3. Term Loan

    A loan from a bank for a specific amount that has a specified ...
  4. Standing Loan

    A type of loan where payments are made of interest only. Repayment ...
  5. Closed-End Credit

    A loan or extension of credit in which the proceeds are dispersed ...
  6. Direct Consolidation Loan

    A loan that combines two or more federal education loans into ...
Related Articles
  1. Personal Finance

    How To Apply For a Personal Loan

    Learn about different avenues for applying for a personal loan, and learn valuable tips to help you get your personal loan application approved.
  2. Small Business

    Small Business Loan Vs Line of Credit: How They Differ

    Understand the differences between a small business loan and a line of credit, and learn some of the most appropriate uses for each form of financing.
  3. Personal Finance

    Home Improvement Loans: What Are Your Best Options?

    If you plan on taking out a home improvement loan, you should know what your options are and which ones might be best for your situation.
  4. Personal Finance

    The Basics of Lines of Credit

    Lines of credit are potentially useful hybrids of credit cards and normal loans. Learn how a line of credit can help (and hurt) your finances, and how to find the best one to suit your needs. ...
  5. Managing Wealth

    Unsecured Personal Loans: 8 Sneaky Traps

    If you are seeking a personal loan, be aware of these pitfalls before you proceed.
  6. Personal Finance

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  7. Personal Finance

    8 Top Alternatives to Car Title Loans

    Before you sign up for a car title loan, investigate these 8 alternate strategies.
  8. Personal Finance

    Personal Loans: To Lend Or Not To Lend?

    Attempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.
  9. Personal Finance

    Have Bad Credit? 6 Ways to a Personal Loan Anyway

    It'll cost you more, but borrowing is definitely doable. Here's how to proceed.
RELATED FAQS
  1. What is the difference between a loan and a line of credit?

    Learn to differentiate between lines of credit and standard loans, and determine when you are likely to use each method of ... Read Answer >>
  2. What are the typical requirements to qualify for closed end credit?

    Learn what closed-end credit is, and the various requirements that borrowers must meet in order to obtain a closed-end credit ... Read Answer >>
  3. How do construction loans work?

    Construction loans are obtained either by the prospective home owner or the actual builder. There are two types of construction ... Read Answer >>
  4. What are some examples of debts that I can consolidate?

    Read about different kinds of debts than can be combined into a consolidation loan, including unsecured debts, secured debts ... Read Answer >>
Hot Definitions
  1. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
  2. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  3. Aggregate Demand

    The total amount of goods and services demanded in the economy at a given overall price level and in a given time period.
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  5. Blue Chip

    A blue chip is a nationally recognized, well-established, and financially sound company.
  6. Payback Period

    The length of time required to recover the cost of an investment. The payback period of a given investment or project is ...
Trading Center