Draw, repay, and draw again
Business lines of credit
A business line of credit gives you pre-approved funds you can tap as needed. You pay only on what you draw, and your available credit comes back as you repay.
What is a business line of credit?
A business line of credit is a pre-approved limit you can draw from as needed, repay, and draw again.
Instead of receiving one lump sum, you tap the line only when you need it, and you pay interest or fees only on what you draw. As you repay, the available credit goes back up. That makes a line a good fit for recurring cash-flow gaps, seasonal inventory, and unexpected expenses. Lines can be secured against collateral or unsecured; secured lines typically offer better rates and terms.
Need a fixed lump sum instead? Compare a business term loan, or read line of credit vs. loan.
Why owners keep a line open
- Ready when you need it: approved funds are available whenever an expense comes up
- Pay only for what you use: no interest on credit you haven't drawn
- Reusable: repay and draw again without reapplying each time
- Renewable: many lines can be renewed without starting over
Business line of credit requirements
Minimum qualifications for our line of credit program:
- 3 months in business
- 500 minimum FICO score
- $10,000 minimum monthly gross sales
Bank vs. online line of credit requirements
| Bank line of credit | Online / alternative line of credit | |
|---|---|---|
| Time in business | Often 2+ years | Often from a few months |
| Credit | Usually good to excellent | Fair credit often considered |
| Financials | Tax returns, financial statements, sometimes collateral | Mainly bank statements and revenue |
| Speed | Weeks | Days |
| Cost | Usually lower | Usually higher |
General patterns, not guarantees. Every lender sets its own criteria.
What you'll need to apply
- A business application
- 6 months of business bank statements
- A direct connection through online banking is preferable
How to choose the best business line of credit
The best line is the one that costs least for the way you will actually use it.
- Limit: enough to cover your real gaps, without paying fees for credit you never use
- Pricing: an interest rate on the drawn balance, or a fee on each draw; ask for both as an estimated APR
- Fees: draw fees, monthly maintenance, annual or renewal fees, and any fee for an unused line
- Repayment: whether each draw is repaid over a set number of weeks or months
- Security: secured lines cost less but put assets at risk; most unsecured lines still need a personal guarantee
- Renewal: how often the line is reviewed and whether the lender can reduce or freeze it
Is there an easy approval or guaranteed line of credit?
No legitimate lender guarantees approval for a line of credit, and "instant approval" usually means an instant preliminary decision, not final funding.
Some lines are easier to qualify for than others: online lenders that review revenue and bank statements are generally easier than banks, and secured lines are easier than unsecured ones. Easier approval usually comes with a smaller limit or higher cost. Be wary of anyone who promises approval before reviewing your business.
Estimate your line of credit payments
Because you only pay for what you draw, your cost depends on how much you use and how fast you repay it. Try different draw amounts, rates, and terms in the line of credit calculator. For example, a $25,000 draw at 18% APR repaid over 12 months is about $2,292 a month, with about $2,504 in interest plus any draw fee (illustration only, not an offer).
Frequently asked questions
Q01How do I secure a line of credit for my business?
Approved lines vary based on your business and can be secured against collateral or unsecured. Secured lines of credit typically offer better rates and terms.
Q02What makes a line of credit useful to small businesses?
You can use it as a revolving source of capital: draw when you need it, pay it down when you want, and repeat.
Q03When do I accrue interest on my credit line?
Only on the money you draw, from when you draw it. As you pay it back, more credit becomes available.
Q04What are the requirements for a business line of credit?
Requirements vary by lender. Banks often want 2+ years in business, good credit, and financial statements. Our program looks for 3 months in business, a 500 FICO score, and $10,000 in monthly gross sales.
Q05Is there a guaranteed approval line of credit?
No. No legitimate lender guarantees approval before reviewing your business. Some lines are easier to qualify for, such as revenue-based online lines or secured lines, but they usually have smaller limits or higher costs.
Q06What is the best line of credit for a small business?
The one with the lowest total cost for how you will use it. Compare limit, pricing, draw and renewal fees, repayment terms, and whether collateral or a personal guarantee is required.
Q07How do I calculate line of credit payments?
Payments depend on the amount drawn, the rate or fee, and how long you take to repay each draw. Use our line of credit calculator to estimate the payment and total cost of a draw.
Sources and further reading
- Manage your finances, U.S. Small Business Administration
- Small Business Credit Survey, Federal Reserve Banks
Financial disclaimer: This page is for general information and is not financial, legal, or tax advice. SmallByzLoans is a funding marketplace, not a lender. Approval, amounts, rates, and terms are set by each funding provider and are subject to underwriting.
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