When it comes to the world of business, many experts hold on to the old adage that you must speculate to accumulate. In other words, in order to grow, you must first put time and money into the business.

Often, the loftier the goal, the more money you need to invest to help reach that goal. For large companies, that investment can come from a formal investment partner in exchange for a stake in the company, floatation of the company on a stock market, or borrowing the money from a financial institution or government agency.

Tesla's new line of credit will help it ready the Model X for production.

 TESLA’S NEW LINE OF CREDIT WILL HELP IT READY THE MODEL X FOR PRODUCTION.

Californian company Tesla Motors  is no stranger to obtaining investment, having relied heavily on venture capital investment, shareholder investment from both Toyota and Daimler. It also made use of a $465 million loan from the U.S. Department of Energy under the Advanced Technology Vehicle Manufacturing Program set up by the Energy Independent and Security Act of 2007 — a loan which it paid off in full five years early in 2013.

Now, two and-a-half years after paying off its DoE loans, official forms submitted to the Securities and Exchanges Commission show that Tesla has secured itself a $500 million line of credit from a group of banks including Bank of America, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Wells Fargo and Credit Suisse.

Think of it like a very large credit card — all be it one which charges a far more agreeable rate.

According to the official Form 8-K filed on Friday with the SEC, the deal was finalised on June 10, with Tesla eligible to obtain up to $500 million of senior secured assed-based revolving credit, which Tesla may make use of at any time. Additionally, the agreement allows for the line of credit to be increase by an additional $250 million at some point in the future, “subject to certain conditions.”

For those unfamiliar with the term of revolving credit, it essentially means that the borrower — in this case Tesla Motors [NASDQ:TSLA] — can make use of the $500 million of credit at any time it needs to. Once the borrowed funds and any interest due on them have been repaid in either part or full, Tesla can borrow money from the credit line again until June 10, 2020 or the creditors end the agreement due to noncompliance. Think of it like a very large credit card — all be it one which charges a far more agreeable rate.

The funds will also help Tesla with its new range of static battery storage units.

 THE FUNDS WILL ALSO HELP TESLA WITH ITS NEW RANGE OF STATIC BATTERY STORAGE UNITS.

Also included in the credit agreement is a $100 million letter of credit sub facility and a $40 million swing line loan sub facility. The former can be used by Tesla to obtain goods or services which can then be exchanged by the recipient for the equivalent funds, facilitating the purchase process for new assets, while the latter is provided to allow Tesla to clear any existing financial commitments and tie them in under the new agreement.

Tesla will be able to use the funds secured through this new line of credit for working capital as well as general corporate purposes.

While $500 million may sound like a large sum, it’s worth noting that lines of credit similar to the one entered into by Tesla aren’t unusual for large firms, especially ones with assets tied up for some reason. In Tesla’s case, that’s particularly important: as its Q1 2015 earnings detailed, its losses had dramatically widened in Q1 2015 compared to its losses at the end of Q4 2015.

Those losses were due in part to massive investment from Tesla in both its upcoming $6 billion Gigafactory lithium-ion manufacturing and reprocessing facility currently being constructed in Reno, NV, as well as research and development work on its recently launched dual-motor Tesla Model S variants, the upcoming Tesla Model X SUV, and Tesla’s expansion into the energy storage business in the form of its Tesla Energy products.

Earlier this year, Tesla had said that it planned to spend more than $1.5 billion in capital spending, much of which would be used to bring the Model X to production and finish the Gigafactory.

The line of credit will also help Tesla and its board finish the Gigafactory Photo: CC-2.0, Steve Jurvetson)

 THE LINE OF CREDIT WILL ALSO HELP TESLA AND ITS BOARD FINISH THE GIGAFACTORY PHOTO: CC-2.0, STEVE JURVETSON)

Despite having plenty of assets in the form of cars leased to customers under its assured value program, Tesla can’t liquidate those assets to fund its other projects, hence its new credit agreement with some of the world’s biggest financial institutions.

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