Business Line of Credit

How It Works

A business line of credit gives you access to a revolving pool of capital that you can draw from as needed. Unlike a traditional term loan where you receive a lump sum upfront, a line of credit lets you take only what you need, when you need it.

You pay interest only on the amount you've drawn, not your total credit limit. As you repay, your available credit replenishes, giving you ongoing access throughout the term.

Key Features

Credit Limits

$25,000 to $500,000 typical range based on business revenue, time in business, and creditworthiness.

Terms

6 to 24 months typical. Some lenders offer ongoing renewal options.

Interest Rates

APR typically ranges from 12% to 45% depending on risk profile and lender.

Repayment

Weekly or monthly interest payments. Minimum payment schedules vary by lender.

Draw Period

Access funds immediately via ACH transfer, typically within 1 business day.

Fees

Origination fees, draw fees, and maintenance fees may apply. All disclosed upfront.

Best Use Cases

Seasonal cash flow gaps: Cover payroll and inventory during slow seasons. Use our business loan calculator to estimate payments.
Project-based expenses: Fund materials and labor before client payment
Inventory purchases: Stock up for peak demand without depleting reserves
Emergency expenses: Handle unexpected repairs or opportunities
Marketing campaigns: Launch time-sensitive initiatives without long-term debt

Qualification Requirements

Minimum Criteria

At least 6 months in business (12+ months preferred)
Minimum monthly revenue of $10,000
Personal credit score of 600+ (higher scores get better terms). Check your loan readiness score to see where you stand.
No active bankruptcies or tax liens
Bank statements showing consistent cash flow

Documentation Needed

3-6 months of business bank statements
Driver's license or ID
Voided business check or bank account details
Business formation documents (if entity)

Advantages vs. Disadvantages

Advantages

✓Pay interest only on drawn amounts
✓Revolving access throughout term
✓Fast approval and funding
✓No collateral required in many cases
✓Builds business credit when used responsibly

Disadvantages

×Higher rates than term loans or SBA
×Shorter terms than traditional loans
×May require personal guarantee
×Can be tempting to over-borrow
×Some lenders charge draw or maintenance fees

Frequently Asked Questions

What's the difference between a business line of credit and a term loan?

A line of credit gives you flexible access to funds you can draw as needed, paying interest only on what you use. A term loan provides a lump sum upfront with fixed monthly payments. Lines of credit are better for ongoing expenses and cash flow management, while term loans are better for one-time purchases. Learn more in our business line of credit vs credit card comparison.

How fast can I get approved for a business line of credit?

Approval typically takes 24-72 hours for alternative lenders. Once approved, you can draw funds immediately via ACH transfer, usually within 1 business day. Traditional banks may take 1-2 weeks for approval.

Can I use a business line of credit for any business expense?

Yes, lines of credit are flexible and can be used for any business purpose including payroll, inventory, marketing, equipment, or operating expenses. Some lenders may restrict certain uses, so check terms carefully.

What credit score do I need for a business line of credit?

Most lenders require a personal credit score of 600+ for business lines of credit. Higher scores (680+) typically qualify for better rates and higher limits. Some lenders also consider business credit scores.

How much can I borrow with a business line of credit?

Credit limits typically range from $25,000 to $500,000, though some lenders offer higher limits. Your limit depends on business revenue, time in business, creditworthiness, and cash flow. Lenders typically approve 10-20% of annual revenue.