Business Line of Credit
Borrow What You Need, When You Need It - Pay Interest Only on What You Use
What is a Business Line of Credit?
A business line of credit is a flexible financing solution that works like a credit card for your business. Instead of receiving a lump sum like a traditional loan, you're approved for a maximum credit limit and can draw funds as needed by borrowing only what you require, when you require it.
The beauty of a line of credit is its revolving nature: as you repay what you've borrowed, those funds become available to use again. You only pay interest on the amount you actually draw, not on your entire credit limit. This makes it perfect for managing cash flow fluctuations, covering unexpected expenses, or seizing time-sensitive opportunities. It's your financial safety net, always there when you need it, costing you nothing when you don't.
Why Choose a Business Line of Credit?
Ultimate Flexibility
Draw exactly what you need, when you need it. No need to borrow a lump sum and pay interest on unused funds.
Pay Interest Only on Usage
Unlike term loans where you pay interest on the full amount, you only pay interest on what you actually withdraw and use.
Revolving Access
As you repay, funds become available again. Your credit line renews automatically so you always have access to capital.
Fast Access to Funds
Once approved, draw funds in minutes via transfer, check, or card. No need to reapply each time you need capital.
Manage Cash Flow Gaps
Perfect for bridging gaps between receivables and payables, covering seasonal slowdowns, or handling unexpected expenses.
Build Business Credit
Responsible use and on-time payments help establish and improve your business credit score for better financing terms in the future.
How It Works: The Revolving Credit Cycle
1. Get Approved – Receive a credit limit (e.g., $100,000)
2. Draw Funds – Use $30,000 for inventory → Available credit: $70,000
3. Repay – Pay back $20,000 → Available credit: $90,000
4. Reuse – Draw $40,000 for payroll → Available credit: $50,000
Uses for a Business Line of Credit
🟢 Manage Cash Flow Fluctuations – Bridge gaps between paying expenses and collecting receivables
🟢 Cover Seasonal Inventory – Stock up before busy seasons without depleting cash reserves
🟢 Meet Payroll During Slow Periods – Ensure employees get paid on time even when revenue dips
🟢 Handle Unexpected Expenses – Emergency repairs, equipment breakdowns, or urgent operational needs
🟢 Take Advantage of Opportunities – Bulk purchase discounts, time-sensitive deals, or sudden growth chances
🟢 Smooth Out Irregular Income – Stabilize finances when customers pay on different schedules
🟢 Fund Marketing Campaigns – Launch promotions without waiting for revenue to accumulate
🟢 Purchase Materials for Projects – Buy supplies for client projects before payment arrives
🟢 Maintain Vendor Relationships – Pay suppliers on time to secure better terms and avoid late fees
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Secured vs. Unsecured Lines of Credit
⚫ Unsecured Business Line of Credit
No collateral required—approval based on your credit, revenue, and business history. Faster approval process with less documentation. Credit limits typically $10,000 to $250,000. Higher interest rates due to increased lender risk. Best for established businesses with strong credit and consistent revenue.
⚫ Secured Business Line of Credit
Requires collateral such as equipment, inventory, real estate, or other business assets. Lower interest rates because collateral reduces lender risk. Higher credit limits possible ($50,000 to $5 million+). Longer approval process with appraisals and documentation. Best for businesses with valuable assets seeking lower rates and larger credit lines.
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Frequently Asked Questions (FAQ)
1. How does interest work on a business line of credit?
You only pay interest on the amount you actually draw and use, not on your total credit limit. If you have a $100,000 credit line but only use $30,000, you only pay interest on the $30,000. Interest accrues daily or monthly depending on the lender, and rates depend on your qualifications and whether the line is secured or unsecured.
2. What's the difference between a line of credit and a term loan?
A term loan gives you a lump sum upfront that you repay over a fixed period with set payments. A line of credit gives you a credit limit to draw from as needed—you only borrow what you use, and as you repay, funds become available again. Term loans are best for one-time major investments; lines of credit are best for ongoing, variable needs.
3. How quickly can I access funds after approval?
Once approved and your line is established, you can typically access funds within minutes to 24 hours via bank transfer, checks, or a debit card linked to your line. The initial approval and setup process takes 2-7 days depending on the lender and your documentation.
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