Lines of credit (sometimes referred to as revolving debt) represent any flexible loan extended to your business. The most common example of this are credit cards, but business credit lines are another logical fit for this financing entry. All lines of credit behave the same way: You have a credit limit, and you can draw money against that limit as you need it. Each payment you make is applied first to any interest charges, then to the outstanding principal.
Adding a line of credit
- Click on the Forecast tab, and then click Financing:
- Click the Add Line of Credit button:
Enter a name for the line of credit, then click Next:
Enter the limit of the line of credit:
Indicate the starting balance on the line of credit as of the beginning of your forecast (if any):
Note: if you have no starting balance, enter zero.
Enter the annual interest rate, then click Next:
Enter the amount you plan to draw from this line of credit in each period, then click Next:
Enter the amount that you plan to pay back in each period:
- Click Create Forecast Item. The line of credit, its payments, the balance due, and available credit will be shown in the Financing table:
Where does this entry appear in my financials?
(For more details, read How LivePlan handles loans and other financing.)
Similarly to a Loan entry, you'll only see the interest portion of your Line of Credit in the Profit and Loss. The interest is the only true cost your business incurs with a line of credit:
Because you can both use your Line of Credit and make a payment on it in the same month, the Balance Sheet will calculate the net debt that remains in each month. This amount is shown as part of the Current Liabilities, as Short-Term Debt:
In the Cash Flow, the net debt of your line of credit will calculate into the Change in Short-Term Debt: