Business Lines of Credit Explained
Flexible revolving credit for businesses that need on-demand access to funds.
A business line of credit gives you access to a set pool of funds you can draw from whenever you need — and only pay interest on what you use. It's one of the most flexible financing tools available, ideal for managing cash flow gaps, seizing opportunities, or handling unexpected expenses.
How a Line of Credit Works
You're approved for a maximum credit limit — say $50,000. You draw funds as needed, repay them (with interest), and the available balance replenishes. Unlike a term loan where you receive a lump sum and repay on a fixed schedule, a line of credit is revolving: borrow, repay, borrow again.
Secured vs. Unsecured Lines
Secured lines of credit are backed by collateral — receivables, inventory, or real estate — and typically offer higher limits and lower rates. Unsecured lines require no collateral but rely more heavily on creditworthiness and revenue history. Most alternative lenders offer unsecured lines for qualifying businesses.
Best Uses for a Line of Credit
Lines of credit shine for managing seasonal cash flow swings, bridging the gap between invoicing and payment, covering payroll during slow periods, taking advantage of bulk purchase discounts, and handling emergency repairs or unexpected costs — without the overhead of applying for a new loan each time.
Qualification Requirements
Lenders typically look for at least 6 months in business, $10,000 or more in monthly revenue, and a demonstrated history of consistent cash flow. Bank statements for the past 6 months are standard. Some lenders also review credit scores, though alternative lenders weigh revenue more heavily.
Costs to Understand
Lines of credit may carry draw fees, maintenance fees, and interest on outstanding balances. Interest rates vary widely — from single digits for bank-issued secured lines to 20–40% APR for alternative unsecured products. Always calculate the total cost of capital before drawing, not just the stated rate.
Get Flexible Access to Capital
A business line of credit could be the financial safety net your business needs. Check your options today.
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