What is a Business Line of Credit?
A business line of credit is a flexible financing solution that gives you access to funds up to a pre-approved limit. Unlike a term loan where you receive a lump sum, you can draw funds as needed, repay, and draw again—similar to a credit card but with higher limits and better rates.
Perfect for managing cash flow fluctuations, covering unexpected expenses, or seizing time-sensitive opportunities without the need to reapply for funding each time.
How Lines of Credit Work
Draw Period: Access funds anytime up to your credit limit through bank transfer or check.
Pay Interest Only on Usage: Unlike term loans, you only pay interest on the amount you've drawn, not your entire credit limit.
Revolving Credit: As you repay, that credit becomes available again without needing to reapply.
Flexible Repayment: Make minimum monthly payments or pay down the balance faster to reduce interest costs.
Common Uses for Lines of Credit
- Smoothing out seasonal cash flow variations
- Covering unexpected business expenses
- Taking advantage of bulk purchase discounts
- Bridging gaps between invoices and payments
- Managing payroll during slow periods
- Emergency equipment repairs
- Opportunity purchases (inventory deals, asset acquisitions)
Who Qualifies?
- Minimum $250K in annual revenue
- At least 1 year in business (some lenders require 2 years)
- Credit score of 650+ preferred
- Strong cash flow and revenue consistency
- No recent bankruptcies
Secured vs. Unsecured Lines of Credit
Unsecured Lines: No collateral required. Approval based on business strength, revenue, and credit. Typically lower credit limits ($10K-$250K) with higher rates but faster approval.
Secured Lines: Backed by collateral such as accounts receivable, inventory, or real estate. Higher credit limits ($100K-$5M), lower rates, but requires collateral evaluation.
Benefits Over Traditional Loans
- Pay for What You Use: No interest on unused credit means lower costs when you don't need funds
- Always Available: Funds ready when opportunities arise without waiting for loan approval
- Flexible Repayment: Pay off quickly or make minimum payments based on your cash flow
- Reusable: Repaid credit becomes available again immediately
- Build Business Credit: Responsible use improves your business credit profile
Typical Rates & Terms
Interest Rates: 8-35% APR for unsecured; 6-20% for secured lines
Credit Limits: $10K-$5M depending on revenue and creditworthiness
Draw Period: Typically 12-24 months with option to renew
Fees: Annual fee (0-2% of limit) and/or monthly maintenance fee ($20-$100)
Access Speed: Instant to 24 hours after initial approval
*Rates and terms vary by lender based on business financials, credit score, and whether line is secured or unsecured.