Under a line of credit, what does the firm do besides pay interest on what it borrows?

1. A line of credit specifies the maximum unsecured short-term borrowing a bank will allow a firm over a given period, typically one year. 2. On top of interest, the firm either pays a fee or keeps a percentage of the loan amount in a checking account at the bank. 3. That retained percentage is generally 10 to 20 percent of the loan amount. 4. Money sitting in a checking account earns little, so the arrangement raises the true cost of the facility. 5. Pledging collateral would make the loan secured, and a line of credit is one of the unsecured bank loans. 6. Companies often use these loans to finance seasonal, cyclical businesses whose cash needs swing through the year. _Source: OpenStax Introduction to Business (CC BY 4.0), Ch 16 "Understanding Financial Management and Securities Markets", section 16.3 Obtaining Short-Term Financing_