A line of credit typically has to be secured by R 5 to R 10 of high-quality assets for every R1 borrowed. This makes it quite a limited resource that should be kept in reserve for items that cannot be financed in any other way. The line of credit should be the last resort, in case nothing else works. Lines of credit are also usually short term funded, so there is a substantial risk of interest rates going up over time. On the other hand, rental rates can be fixed over the entire rental period, making forecasting and budgeting much easier. Finally, lines of credit often require a company to pay additional fees, or incur additional costs. These costs can be reporting inventory or AR levels.
