Business lines of credit
A line of credit gives you reusable access to funds up to a set limit. You draw what you need, when you need it, and the cost generally applies only to what you have drawn.
What it is
A business line of credit is a standing limit you can draw from repeatedly. As you repay, the available credit replenishes — more like a business credit card than a lump-sum loan.
Draws may be repaid on a fixed schedule per draw, or on a revolving basis with minimum payments. The cost is typically expressed as an interest rate on the outstanding balance, though some providers add draw fees, maintenance fees, or unused-line fees.
When businesses typically consider it
Businesses typically consider a line of credit for recurring or unpredictable needs: smoothing seasonal cash flow, covering inventory purchases, or bridging the gap between doing the work and getting paid.
It is a working-capital tool by design. For a single large purchase with a known price, a term loan or equipment financing is usually the more natural structure to compare.
Tradeoffs
- Flexibility vs. discipline: Drawing only what you need keeps costs down — but easy access makes it tempting to carry a balance for expenses the business cannot actually support.
- Cost on what you use vs. fees on what you don't: You generally pay for what you draw, which is efficient. But some lines charge fees whether or not you use them, so the line is not always free to keep open.
- Reusable credit vs. changing terms: Providers can often reduce a limit or decline renewal. A line of credit is not a guarantee that funds will be there when you eventually need them.
What to compare
- Cost on drawn balances — and how it is calculated
- Fees that apply regardless of use: annual, maintenance, draw, or unused-line fees
- Repayment structure per draw: fixed schedule or revolving minimums
- Whether the limit can be reduced or the line not renewed, and under what conditions
- What secures the line: collateral, a personal guarantee, or a UCC filing
What this page cannot know
- What limit or pricing any provider would extend to your business
- Whether your cash flow pattern suits a revolving structure
- Whether a provider will renew or reduce a line in the future
- Anything about your business you have not entered into one of our tools
Run your own numbers
Start with the numbers, not a lender. The tools are free, and nothing you enter leaves your browser.