The maximum amount a borrower is approved to borrow on a facility or account.
For example, a business is approved for a $75,000 operating line of credit. It currently has $40,000 drawn, leaving $35,000 available — once it repays any portion of the $40,000, that amount becomes available to draw again up to the $75,000 credit limit.
Why it matters: It defines the maximum purchasing power available without needing new approvals, acting as a crucial buffer for working capital.
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