What is Line of credit (LOC)?
Revolving credit you draw on as needed and repay down. You only pay interest on what you've drawn. Great for working capital and receivables timing.
LOC stands for Line of credit.
Also called LOC in real estate, revolving line of credit.
A line of credit is a limit rather than a lump sum. The lender approves an amount, and the borrower draws against it as the need arises, repays, and draws again. Interest accrues only on the balance actually outstanding, which is the whole reason it suits irregular cash needs that a term loan handles badly.
In real estate the distinction from a term loan is one of shape, not of size. A term loan funds once and amortises on a schedule; a line breathes with the business. An investor covering the gap between paying subcontractors and receiving a draw, or between buying materials and selling a finished unit, is managing timing rather than financing an asset, and a limit that can be drawn and repaid repeatedly fits that pattern.
Two details decide whether a line is genuinely useful. The first is what secures it — a line can sit against property, against receivables, or against the business itself, and that determines what happens if the collateral value moves. The second is whether the limit can be reduced or withdrawn, and under what conditions, because a facility that disappears when it is most needed is not the safety net it appeared to be.