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 Though it normally has an upward limit, as long as the funds are paid back as agreed, they can be withdrawn as needed on very short notice.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.

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