Business line of credit
Flexible working capital when your business needs it
Some businesses don't know exactly when they'll need additional capital — they simply know they will. A business line of credit may provide access to a predetermined amount of financing that businesses can draw from when needed.
Rather than applying for a new lump-sum loan every time an expense arises, an established credit line can provide ongoing access to working capital, subject to the terms of the financing program.
How does a business line of credit work?
When approved, a business receives access to a credit limit and may draw available funds as needed. Depending on the lender and product: the business obtains an approved credit limit, funds are drawn when necessary, the business repays the borrowed amount, available credit may replenish, and the business may draw funds again subject to account terms.
This revolving structure makes lines of credit particularly useful for businesses with recurring financing needs — for cash-flow fluctuations, inventory, payroll, emergency expenses, marketing, repairs, supplies, contract expenses, seasonal purchasing, or short-term opportunities. Unlike a term loan, businesses typically don't have to borrow their entire available limit at once.
By industry
Lines of credit by business type
Contractors
- Materials & payroll
- Subcontractors
- Equipment rental
- Fuel
- Project startup costs
Repay once a client pays, and restore available credit for the next project.
Restaurants
- Inventory & food purchases
- Payroll
- Equipment repairs
- Seasonal expenses
- Marketing
A standing source of working capital without financing every unexpected expense separately.
Retailers
- Seasonal merchandise
- Holiday inventory
- New product lines
- Promotional inventory
- Supplies
E-Commerce
- Inventory & advertising
- Fulfillment & shipping
- Supplier payments
- Seasonal demand
- New product launches
Trucking Companies
- Fuel & maintenance
- Repairs & tires
- Insurance
- Payroll
Recurring expenses can make revolving credit attractive for transportation companies.
Structure options
Secured vs. unsecured lines of credit
Secured line of credit
A lender may require qualifying business assets or other collateral.
Unsecured line of credit
May not require traditional physical collateral, but relies more heavily on credit, business revenue, operating history, cash flow, and personal guarantees. Requirements differ by lender.
Line of credit vs. business loan
A term loan may make sense when you know exactly how much capital you need for a defined purchase or project. A line of credit may make sense when you expect to need working capital repeatedly but don't know exactly when or how much.
Line of credit vs. business credit card
Both may provide revolving credit, but they aren't identical. Business lines of credit are often designed specifically for working capital, while business credit cards are frequently used for everyday purchases. Rates, fees, limits, repayment terms, and qualification standards can vary significantly.
FAQ
Business line of credit FAQs
What credit score is needed for a business line of credit?
There is no universal minimum. Requirements differ by lender and may also depend on revenue, time in business, and overall financial strength.
Can a new business get a business line of credit?
Some lenders require significant operating history, while others may work with younger businesses. Program requirements vary.
How much business credit can I receive?
Credit limits depend on the lender's underwriting criteria and the financial profile of the business.
Do I pay interest on the entire credit line?
Depending on the product, businesses generally incur financing costs on amounts actually drawn rather than unused available credit. Specific terms should always be reviewed.
Can I use a business line of credit for payroll?
Many business owners use lines of credit for working-capital expenses such as payroll, provided the financing agreement permits the use.
Build financial flexibility into your business
A business opportunity doesn't always arrive at a convenient time. Neither does an unexpected expense. A business line of credit can give qualifying companies access to capital when they need it.
Explore line of credit options