Flexibility
Draw only what you need, when you need it. Repay and use it again—no need to reapply for each expense.
Business Line of Credit
What Is a Business Line of Credit?
A business line of credit is a revolving credit limit your company can access as needed. You draw funds, use them for short-term needs, and then pay them back over time. As you repay, your available credit replenishes—similar to a credit card, but often with higher limits and more flexible structures for business use.
How It Works Day-to-Day
- You’re approved for a credit limit (for example, $50,000).
- You draw only what you need (say $15,000) for payroll, inventory, or a project.
- You pay interest on the amount you’ve drawn, not the full limit.
- As you make payments, your available credit opens back up.
- You can draw again without applying for a brand-new loan each time.
Best Uses for a Line of Credit
- Covering short-term cash-flow gaps between payables and receivables.
- Buying inventory ahead of busy seasons.
- Handling unexpected expenses or minor emergencies.
- Funding small projects or opportunities where you’ll see a quick return.
- Backing up your cash reserves as a safety net.
Benefits of a Business Line of Credit
Control
Keep your payments manageable by borrowing in smaller, targeted amounts instead of a large lump sum.
Speed
Once approved and set up, future draws can often be accessed quickly, sometimes within the same day.
Only Pay for What You Use
You’re typically charged interest only on the outstanding balance, not your full limit.
Example Scenarios
Scenario 1 – Seasonal Retailer
A retailer uses a line of credit to stock up on inventory before the holiday rush. As inventory sells and cash comes in, they pay down the balance and free up room for the next season.
Scenario 2 – Service Business Bridging Receivables
A service company bills clients on Net 30–45 terms but has weekly payroll. The line of credit fills the gap, giving them steady cash flow while they wait to be paid.
Scenario 3 – Contractor Handling Change Orders
A contractor uses their line to cover materials and labor for change orders or small projects, then pays it down as their invoices are collected.
What Lenders Look At
Lines of credit are often based on a mix of your **business performance** and **credit profile**. Lenders typically evaluate:
- Time in business and industry stability.
- Average monthly revenue and cash-flow trends.
- Profitability and existing debt obligations.
- Business and/or personal credit history.
- Any collateral or security, depending on the structure and size.
What You May Need to Provide
- Recent business bank statements.
- Business financial statements and/or tax returns.
- Business details: entity type, ownership, and time in business.
- Personal credit and financial information (for many small businesses).
- Accounts receivable or inventory details for larger or asset-based lines.
Line of Credit vs. Term Loan
A line of credit is best for **repeating, short-term needs** and managing cash flow. A term loan is usually better for **one-time, larger projects** like buying equipment, opening a new location, or consolidating existing debt. Many businesses use both: a line for day-to-day flexibility and loans for big, planned moves.
How Fast Finance Helps
Fast Finance reviews your cash-flow patterns, revenue, and goals to match you with line of credit options that fit your stage and risk profile. We help you compare:
- Limits and draw structures.
- Rates and fee structures (including any draw fees or annual fees).
- Repayment terms and minimum payment requirements.
- Whether a line, term loan, or a combination makes the most sense.
Want a flexible backup plan for your business cash flow? Check my line of credit options