Is A Bank Line Of Credit Also Known As Something Else?

A Bank Line Of Credit Is Also Known As a revolving credit facility. At bankprofits.net, we help you understand the nuances of banking and finance to make informed decisions that drive profitability. Dive in to explore what this means for you and your financial strategy.

1. What is a Bank Line of Credit?

A bank line of credit is also known as a revolving credit facility, representing a flexible borrowing arrangement between a bank and a borrower. This arrangement allows the borrower to draw funds up to a pre-approved limit, repay the drawn amount, and then borrow again as needed. Understanding this financial tool is crucial for businesses and individuals alike.

1.1. Defining Revolving Credit Facility

A revolving credit facility functions much like a credit card but typically involves larger sums of money and is used for business purposes. It allows businesses to access funds as needed, repay them, and reuse the credit line repeatedly. This flexibility is particularly useful for managing cash flow gaps or unexpected expenses.

1.2. Key Features of a Bank Line of Credit

1. Credit Limit: A pre-approved maximum amount the borrower can access.
2. Interest Rate: Usually variable, based on a benchmark rate like the prime rate or LIBOR (though LIBOR is being phased out, as noted by the Governmental Accounting Standards Board).
3. Repayment Terms: Flexible, often requiring minimum monthly payments, with the option to repay the full balance at any time.
4. Fees: May include origination fees, annual fees, and draw fees.

1.3. How Bank Line of Credit Differs from Term Loans

Unlike term loans, which provide a lump sum of money repaid over a fixed period, a bank line of credit offers ongoing access to funds. Term loans are suited for long-term investments, while lines of credit are ideal for short-term working capital needs.

2. Why Businesses Use Bank Lines of Credit

Businesses use bank lines of credit for various strategic and operational reasons. Here are some of the most common scenarios:

2.1. Managing Cash Flow

One of the primary reasons businesses opt for a line of credit is to manage cash flow fluctuations.

• Seasonal Businesses: Businesses with seasonal revenue streams, such as retail or agriculture, can use a line of credit to cover expenses during slow periods.
• Unexpected Expenses: A line of credit can provide a financial cushion for unexpected costs like equipment repairs or emergency supplies.

2.2. Funding Working Capital

Working capital is the lifeblood of any business, and a line of credit can help maintain healthy levels.

• Inventory Purchases: Businesses can use a line of credit to purchase inventory, ensuring they have enough stock to meet customer demand.
• Accounts Receivable: A line of credit can bridge the gap between providing goods or services and receiving payment from customers.

2.3. Taking Advantage of Opportunities

Sometimes, opportunities arise that require immediate capital.

• Bulk Discounts: Businesses can use a line of credit to take advantage of discounts on bulk purchases of supplies or inventory.
• Expansion: A line of credit can provide the necessary funds to expand operations, such as opening a new location or launching a new product line.

2.4. Emergency Funding

In times of crisis, a line of credit can be a lifeline.

• Economic Downturns: Businesses can use a line of credit to stay afloat during economic downturns when revenue may decline.
• Natural Disasters: A line of credit can help businesses recover from natural disasters by providing funds for repairs and replacements.

3. Benefits of Using a Bank Line of Credit

A bank line of credit offers several advantages that make it an attractive financing option for businesses.

3.1. Flexibility

The flexibility of a line of credit is one of its most significant benefits.

• Access Funds When Needed: Businesses can draw funds only when they need them, avoiding unnecessary interest costs.
• Repay and Reuse: Once the borrowed amount is repaid, the credit line is replenished and available for future use.

3.2. Lower Costs Compared to Alternatives

Compared to other financing options, a line of credit can be more cost-effective.

• Lower Interest Rates: Lines of credit often have lower interest rates than credit cards or factoring.
• No Prepayment Penalties: Businesses can repay the borrowed amount at any time without incurring prepayment penalties.

3.3. Helps Build Credit

Using a line of credit responsibly can help businesses build a strong credit history.

• Positive Payment History: Making timely payments on the line of credit can improve the business’s credit score.
• Increased Creditworthiness: A good credit score can make it easier to obtain other types of financing in the future.

3.4. Simpler Application Process

The application process for a line of credit is generally simpler than that for a term loan or bond issue.

• Less Documentation: Lines of credit typically require less documentation than other types of financing.
• Faster Approval: The approval process is often faster, allowing businesses to access funds more quickly.

4. Types of Bank Lines of Credit

Understanding the different types of bank lines of credit is crucial for selecting the one that best fits a business’s needs.

4.1. Secured vs. Unsecured Lines of Credit

1. Secured Lines of Credit: These are backed by collateral, such as accounts receivable, inventory, or other assets. They often come with lower interest rates and higher borrowing limits.
2. Unsecured Lines of Credit: These are not backed by collateral and are typically offered to businesses with strong credit histories. They may have higher interest rates and lower borrowing limits.

4.2. Committed vs. Uncommitted Lines of Credit

1. Committed Lines of Credit: These provide a guaranteed line of credit for a specified period. The bank is obligated to provide funds as long as the borrower meets the terms of the agreement.
2. Uncommitted Lines of Credit: These do not guarantee access to funds. The bank can refuse to advance funds if it deems the borrower too risky.

4.3. Revolving vs. Non-Revolving Lines of Credit

1. Revolving Lines of Credit: As the borrower repays the outstanding balance, the credit line is replenished and can be used again.
2. Non-Revolving Lines of Credit: Once the borrower repays the outstanding balance, the credit line is closed and cannot be used again.

5. How to Qualify for a Bank Line of Credit

Qualifying for a bank line of credit involves meeting certain criteria set by the bank. Here are some key factors that banks consider:

5.1. Credit Score

A good credit score is essential for obtaining a line of credit.

• Credit History: Banks will review the business’s credit history to assess its ability to repay debt.
• Creditworthiness: A strong credit score demonstrates that the business is a responsible borrower.

5.2. Financial Statements

Banks will require financial statements to assess the business’s financial health.

• Income Statement: This shows the business’s revenue, expenses, and profit over a period of time.
• Balance Sheet: This provides a snapshot of the business’s assets, liabilities, and equity at a specific point in time.
• Cash Flow Statement: This shows the movement of cash into and out of the business over a period of time.

5.3. Collateral

For secured lines of credit, banks will require collateral to mitigate their risk.

• Types of Collateral: Acceptable collateral may include accounts receivable, inventory, equipment, or real estate.
• Collateral Value: The value of the collateral must be sufficient to cover the amount of the line of credit.

5.4. Business Plan

A well-prepared business plan can increase the chances of approval.

• Executive Summary: This provides an overview of the business and its goals.
• Company Description: This describes the business’s products or services, target market, and competitive advantages.
• Market Analysis: This assesses the size and growth potential of the market.
• Management Team: This introduces the key members of the management team and their experience.
• Financial Projections: This forecasts the business’s revenue, expenses, and cash flow over a period of time.

6. Interest Rates and Fees

Understanding the interest rates and fees associated with a bank line of credit is crucial for managing costs effectively.

6.1. Interest Rates

Interest rates on lines of credit are typically variable and based on a benchmark rate.

• Prime Rate: This is the interest rate that banks charge their most creditworthy customers.
• LIBOR: The London Interbank Offered Rate, although it is being phased out. New agreements should not reference LIBOR.
• Spread: The margin added to the benchmark rate to determine the interest rate on the line of credit.

6.2. Fees

Banks may charge various fees for lines of credit.

• Origination Fee: A one-time fee charged when the line of credit is established.
• Annual Fee: A fee charged each year to maintain the line of credit.
• Draw Fee: A fee charged each time funds are drawn from the line of credit.
• Commitment Fee: A fee charged on the unused portion of the line of credit.

6.3. How to Negotiate Better Rates and Fees

Negotiating better rates and fees can save a business significant money.

• Shop Around: Obtain quotes from multiple banks to compare rates and fees.
• Leverage Competition: Use competing offers to negotiate better terms with the preferred bank.
• Strong Financials: Demonstrate strong financial performance to negotiate lower rates.
• Long-Term Relationship: Build a long-term relationship with the bank to negotiate more favorable terms.

7. Alternatives to Bank Lines of Credit

While bank lines of credit are a popular financing option, there are alternatives to consider.

7.1. Term Loans

Term loans provide a lump sum of money repaid over a fixed period.

• Best For: Long-term investments, such as purchasing equipment or real estate.
• Pros: Fixed interest rates, predictable payments.
• Cons: Less flexible than lines of credit, stricter approval requirements.

7.2. Invoice Factoring

Invoice factoring involves selling accounts receivable to a factoring company.

• Best For: Businesses with cash flow gaps due to slow-paying customers.
• Pros: Quick access to cash, no debt incurred.
• Cons: Can be expensive, may damage customer relationships.

7.3. Business Credit Cards

Business credit cards offer a revolving line of credit for business expenses.

• Best For: Small businesses with limited financing needs.
• Pros: Easy to obtain, flexible spending.
• Cons: Higher interest rates, lower credit limits.

7.4. SBA Loans

SBA loans are government-backed loans for small businesses.

• Best For: Startups and small businesses with limited access to capital.
• Pros: Lower interest rates, longer repayment terms.
• Cons: Strict eligibility requirements, lengthy application process.

8. Best Practices for Managing a Bank Line of Credit

Managing a bank line of credit effectively is crucial for maximizing its benefits and avoiding potential pitfalls.

8.1. Monitor Usage

Keep a close eye on the usage of the line of credit.

• Track Spending: Monitor how much is being drawn from the line of credit and what it is being used for.
• Stay Within Limit: Avoid exceeding the credit limit, as this can result in fees and penalties.

8.2. Make Timely Payments

Ensure that payments are made on time to avoid late fees and maintain a good credit score.

• Set Reminders: Set up payment reminders to avoid missing due dates.
• Automate Payments: Automate payments to ensure they are made on time.

8.3. Manage Cash Flow

Use the line of credit as a tool to manage cash flow effectively.

• Forecast Cash Needs: Forecast future cash needs to determine when to draw from the line of credit.
• Repay Quickly: Repay the borrowed amount as quickly as possible to minimize interest costs.

8.4. Review Terms Regularly

Review the terms of the line of credit regularly to ensure they still meet the business’s needs.

• Interest Rates: Monitor interest rates to ensure they are competitive.
• Fees: Review fees to ensure they are reasonable.
• Covenants: Understand and comply with any covenants included in the line of credit agreement.

Alt: Businesswoman efficiently uses a laptop while holding a credit card, symbolizing effective financial management.

9. Case Studies

Examining real-world examples can provide valuable insights into how businesses use bank lines of credit.

9.1. Retail Business Managing Seasonal Fluctuations

A retail business experiences a significant increase in sales during the holiday season but faces slow periods in the off-season.

• Solution: The business uses a line of credit to cover expenses during the off-season and purchase inventory for the holiday season.
• Outcome: The business maintains healthy cash flow throughout the year and maximizes sales during peak periods.

9.2. Manufacturing Company Funding Working Capital

A manufacturing company needs to purchase raw materials to fulfill customer orders but faces delays in receiving payments from customers.

• Solution: The company uses a line of credit to purchase raw materials and bridge the gap between providing goods and receiving payment.
• Outcome: The company fulfills customer orders on time and maintains a steady stream of revenue.

9.3. Tech Startup Expanding Operations

A tech startup wants to expand its operations by opening a new office and hiring additional employees.

• Solution: The startup uses a line of credit to cover the costs of opening the new office and hiring new employees.
• Outcome: The startup expands its operations successfully and increases its market share.

10. The Future of Bank Lines of Credit

The future of bank lines of credit is likely to be shaped by technological advancements and changing market conditions.

10.1. Technological Advancements

Technology is transforming the way businesses access and manage financing.

• Online Lending Platforms: These platforms offer a streamlined application process and faster approval times.
• Fintech Innovations: Fintech companies are developing new and innovative ways to provide lines of credit to businesses.

10.2. Changing Market Conditions

Changing market conditions are also impacting the landscape of bank lines of credit.

• Economic Uncertainty: Economic uncertainty is driving demand for flexible financing options like lines of credit.
• Regulatory Changes: Regulatory changes are impacting the terms and conditions of lines of credit.

10.3. Predictions for the Future

Experts predict that bank lines of credit will continue to be a popular financing option for businesses.

• Increased Demand: Demand for lines of credit is expected to increase as businesses seek flexible financing solutions.
• Greater Competition: Competition among lenders is expected to intensify, leading to more favorable terms for borrowers.

11. Common Mistakes to Avoid When Using a Bank Line of Credit

Using a bank line of credit effectively requires avoiding common mistakes that can lead to financial difficulties.

11.1. Overborrowing

Borrowing more than the business can afford to repay is a common mistake.

• Solution: Assess the business’s ability to repay debt before drawing from the line of credit.
• Tip: Only borrow what is needed and have a clear plan for repayment.

11.2. Using for Long-Term Investments

Using a line of credit for long-term investments can lead to cash flow problems.

• Solution: Use a line of credit for short-term working capital needs, not long-term investments.
• Tip: Consider a term loan for long-term investments.

11.3. Ignoring Fees

Ignoring fees can result in unexpected costs.

• Solution: Understand all fees associated with the line of credit.
• Tip: Negotiate fees with the bank to minimize costs.

11.4. Neglecting to Monitor Usage

Failing to monitor usage can lead to overspending and financial difficulties.

• Solution: Track spending and stay within the credit limit.
• Tip: Use budgeting tools to monitor usage and manage cash flow.

12. Regulatory and Legal Considerations

Navigating the regulatory and legal landscape is crucial when using a bank line of credit.

12.1. Compliance with Lending Laws

Businesses must comply with all applicable lending laws.

• Truth in Lending Act: This law requires lenders to disclose the terms and conditions of loans.
• Equal Credit Opportunity Act: This law prohibits discrimination in lending based on race, color, religion, national origin, sex, marital status, or age.

12.2. Understanding Loan Agreements

Businesses must understand the terms and conditions of the loan agreement.

• Interest Rates: Understand how interest rates are calculated and when they may change.
• Fees: Understand all fees associated with the line of credit.
• Covenants: Understand and comply with any covenants included in the loan agreement.

12.3. Consulting with Legal Counsel

It is advisable to consult with legal counsel before entering into a line of credit agreement.

• Legal Review: Have legal counsel review the loan agreement to ensure it is fair and reasonable.
• Risk Assessment: Have legal counsel assess the risks associated with the line of credit.

13. Bank Line of Credit vs. Other Short-Term Financing Options

When it comes to short-term financing, businesses have several options to choose from. It’s essential to understand the differences between them to make the right decision.

13.1. Bank Line of Credit

• Definition: A flexible loan from a bank that allows you to borrow money up to a certain limit and repay it over time.
• Pros:
  • Flexibility in borrowing and repayment.
  • Typically lower interest rates than credit cards.
  • Helps build business credit.
• Cons:
  • Requires a good credit score.
  • May come with fees such as origination or annual fees.
  • Interest rates can fluctuate.

13.2. Short-Term Loan

• Definition: A loan with a fixed term, usually repaid within a year.
• Pros:
  • Predictable repayment schedule.
  • Can be easier to qualify for than a line of credit.
• Cons:
  • Less flexible than a line of credit.
  • May have higher interest rates than a line of credit.

13.3. Invoice Financing

• Definition: Borrowing money against your outstanding invoices.
• Pros:
  • Quick access to cash.
  • Doesn’t rely on your credit score.
• Cons:
  • Can be expensive.
  • May damage customer relationships.

13.4. Business Credit Card

• Definition: A credit card specifically for business expenses.
• Pros:
  • Easy to obtain.
  • Offers rewards and cashback.
• Cons:
  • High interest rates.
  • Lower credit limits.

14. How to Use a Bank Line of Credit for Business Growth

A bank line of credit can be a powerful tool for fueling business growth. Here are some strategies to consider:

14.1. Investing in Marketing

• Strategy: Use the line of credit to fund marketing campaigns that increase brand awareness and attract new customers.
• Example: A local bakery uses a line of credit to launch a social media advertising campaign, resulting in a 20% increase in sales.

14.2. Expanding Inventory

• Strategy: Use the line of credit to purchase additional inventory to meet growing customer demand.
• Example: An online retailer uses a line of credit to stock up on popular items before the holiday season, resulting in a 30% increase in revenue.

14.3. Hiring New Employees

• Strategy: Use the line of credit to cover the costs of hiring and training new employees to support business growth.
• Example: A software company uses a line of credit to hire additional developers, allowing them to launch new features and attract more customers.

14.4. Upgrading Equipment

• Strategy: Use the line of credit to invest in new equipment that improves efficiency and productivity.
• Example: A manufacturing company uses a line of credit to purchase a new machine, resulting in a 15% increase in production output.

15. The Role of a Bank Line of Credit in Financial Planning

A bank line of credit can play a crucial role in a company’s overall financial planning, providing both a safety net and an opportunity for strategic growth.

15.1. Cash Flow Management

• Purpose: A line of credit can help bridge the gap between accounts payable and accounts receivable, ensuring the company can meet its financial obligations.
• Example: A construction company uses a line of credit to pay its suppliers while waiting for payment from clients.

15.2. Emergency Funding

• Purpose: A line of credit can provide access to funds in case of unexpected expenses or emergencies.
• Example: A restaurant uses a line of credit to cover the costs of repairing a broken freezer.

15.3. Strategic Investments

• Purpose: A line of credit can be used to fund strategic investments that drive long-term growth and profitability.
• Example: A marketing agency uses a line of credit to acquire a smaller competitor, expanding its market share and service offerings.

15.4. Debt Management

• Purpose: A line of credit can be used to consolidate high-interest debt, reducing the overall cost of borrowing.
• Example: A retail business uses a line of credit to pay off several high-interest credit cards, saving thousands of dollars in interest payments.

16. Navigating the Application Process for a Bank Line of Credit

Applying for a bank line of credit can seem daunting, but with the right preparation, you can increase your chances of approval.

16.1. Gather Necessary Documents

• Requirements: Banks typically require financial statements, tax returns, and a business plan.
• Tip: Gather all necessary documents before starting the application process to avoid delays.

16.2. Improve Credit Score

• Importance: A good credit score is essential for obtaining a line of credit.
• Tip: Check your credit report for errors and take steps to improve your credit score before applying.

16.3. Shop Around for the Best Rates

• Strategy: Compare rates and fees from multiple banks to find the best deal.
• Tip: Don’t be afraid to negotiate with banks to get the best possible terms.

16.4. Prepare a Strong Business Plan

• Purpose: A well-prepared business plan can demonstrate your ability to repay the line of credit.
• Tip: Include detailed financial projections and a clear explanation of how you will use the line of credit.

17. Understanding the Covenants in a Bank Line of Credit Agreement

Covenants are conditions that a borrower must meet to maintain the line of credit. Understanding these covenants is crucial for avoiding default.

17.1. Financial Covenants

• Definition: Financial covenants require the borrower to maintain certain financial ratios, such as a minimum debt-to-equity ratio.
• Example: A company may be required to maintain a debt-to-equity ratio of no more than 2:1.

17.2. Reporting Covenants

• Definition: Reporting covenants require the borrower to provide regular financial reports to the bank.
• Example: A company may be required to provide quarterly financial statements to the bank.

17.3. Operational Covenants

• Definition: Operational covenants restrict the borrower from taking certain actions without the bank’s approval, such as making significant investments or acquisitions.
• Example: A company may be prohibited from making acquisitions of more than $1 million without the bank’s approval.

17.4. Consequences of Violating Covenants

• Impact: Violating covenants can result in penalties, such as increased interest rates or even the termination of the line of credit.
• Tip: Carefully review the covenants in the loan agreement and ensure you can comply with them.

18. The Impact of Economic Conditions on Bank Lines of Credit

Economic conditions can have a significant impact on bank lines of credit, affecting interest rates, availability, and terms.

18.1. Interest Rates

• Impact: During periods of economic growth, interest rates tend to rise, increasing the cost of borrowing.
• Example: The Federal Reserve raises interest rates to combat inflation, making lines of credit more expensive.

18.2. Availability

• Impact: During economic downturns, banks may become more cautious about lending, making it harder to obtain a line of credit.
• Example: A recession leads to increased loan defaults, causing banks to tighten their lending standards.

18.3. Terms

• Impact: During periods of economic uncertainty, banks may shorten the terms of lines of credit or require more collateral.
• Example: A global pandemic leads to increased economic uncertainty, causing banks to shorten the terms of lines of credit from five years to three years.

Alt: Businessman analyzing sales data on his laptop, depicting data-driven strategies for business growth.

19. How to Choose the Right Bank for a Line of Credit

Choosing the right bank for a line of credit can have a significant impact on your business’s financial health. Here are some factors to consider:

19.1. Interest Rates and Fees

• Importance: Compare interest rates and fees from multiple banks to find the best deal.
• Tip: Look beyond the interest rate and consider all fees, such as origination fees and annual fees.

19.2. Credit Limit

• Importance: Choose a bank that offers a credit limit that meets your business’s needs.
• Tip: Don’t overestimate your needs, but make sure you have enough credit to cover unexpected expenses.

19.3. Repayment Terms

• Importance: Choose a bank that offers repayment terms that are manageable for your business.
• Tip: Look for flexible repayment options, such as the ability to make interest-only payments.

19.4. Customer Service

• Importance: Choose a bank that offers excellent customer service and is responsive to your needs.
• Tip: Read online reviews and talk to other business owners to get a sense of the bank’s customer service.

20. Future Trends in Bank Line of Credit

The world of finance is constantly evolving, and bank lines of credit are no exception. Here are some trends to watch out for:

20.1. Increased Use of Technology

• Trend: Banks are increasingly using technology to streamline the application process and improve customer service.
• Example: Online lending platforms allow businesses to apply for a line of credit in minutes, without ever visiting a bank branch.

20.2. Greater Focus on Risk Management

• Trend: Banks are becoming more sophisticated in their risk management practices, using data analytics to assess the creditworthiness of borrowers.
• Example: Banks are using artificial intelligence to analyze financial statements and predict the likelihood of default.

20.3. Rise of Alternative Lenders

• Trend: Alternative lenders, such as peer-to-peer lending platforms, are offering lines of credit to businesses that may not qualify for traditional bank loans.
• Example: A small business with a limited credit history obtains a line of credit from an online lending platform.

20.4. Increased Regulation

• Trend: Regulators are paying closer attention to the lending practices of banks and other financial institutions, leading to increased compliance costs.
• Example: New regulations require banks to conduct more thorough due diligence on borrowers.

Understanding the role of a bank line of credit, also known as a revolving credit facility, is essential for effective financial management. This flexible tool can help businesses manage cash flow, fund working capital, and seize opportunities. By choosing the right type of credit line, understanding the terms, and managing it responsibly, businesses can leverage this financial tool to achieve their goals.

Ready to explore more strategies for maximizing bank profitability? Visit bankprofits.net for in-depth analysis, expert insights, and actionable strategies. Contact us at 33 Liberty Street, New York, NY 10045, United States, or call +1 (212) 720-5000. Let us help you navigate the complexities of bank finances and unlock new opportunities for growth and efficiency. Discover the potential of strategic financial planning and drive your bank’s success today with strategies for credit management and financial leverage!

Frequently Asked Questions (FAQs) About Bank Lines of Credit

1. What is a bank line of credit also known as?

A bank line of credit is also known as a revolving credit facility, which provides flexible access to funds up to a pre-approved limit. This allows businesses to borrow, repay, and re-borrow as needed.

2. How does a bank line of credit differ from a term loan?

Unlike term loans, which provide a lump sum repaid over a fixed period, a bank line of credit offers ongoing access to funds. Term loans are suitable for long-term investments, while lines of credit are ideal for short-term working capital needs.

3. What are the key benefits of using a bank line of credit?

The key benefits include flexibility, lower costs compared to alternatives like credit cards, helping to build credit, and a simpler application process than other financing options.

4. What types of bank lines of credit are available?

The main types include secured vs. unsecured lines of credit, committed vs. uncommitted lines of credit, and revolving vs. non-revolving lines of credit.

5. How can I qualify for a bank line of credit?

To qualify, you typically need a good credit score, strong financial statements, collateral (for secured lines), and a well-prepared business plan.

6. What interest rates and fees are associated with a bank line of credit?

Interest rates are typically variable and based on benchmarks like the prime rate. Fees can include origination fees, annual fees, draw fees, and commitment fees.

7. What are some alternatives to bank lines of credit?

Alternatives include term loans, invoice factoring, business credit cards, and SBA loans.

8. What are best practices for managing a bank line of credit?

Best practices include monitoring usage, making timely payments, managing cash flow effectively, and reviewing terms regularly to ensure they still meet your business needs.

9. What are common mistakes to avoid when using a bank line of credit?

Common mistakes include overborrowing, using it for long-term investments, ignoring fees, and neglecting to monitor usage.

10. How does economic uncertainty impact bank lines of credit?

Economic uncertainty can lead to stricter lending standards, shorter terms, and increased caution from banks, making it harder to obtain a line of credit and potentially increasing costs.