Most flexible
Business line of credit
A line of credit gives you an approved limit you can draw against as needed, repay, and draw again. You pay only for what is outstanding. For any business with a recurring or seasonal cash gap, this is almost always cheaper over twelve months than taking repeated lump-sum advances for the same problem.
- Limit
- $10,000 – $250,000 typical
- Draw
- As needed, up to the limit
- Cost
- Charged on the drawn balance
- Term
- Revolving, subject to periodic review
- Decision
- Days rather than hours
- Best for
- Recurring or seasonal gaps
How it works
You get approved for a limit. You draw what you need, when you need it. You are charged on the drawn balance, not the full limit. As you repay, the availability comes back.
The practical difference from a lump sum is significant. A contractor who needs $40,000 for eight weeks, four times a year, pays for 32 weeks of money on a line. The same contractor taking four separate six-month advances pays for 96 weeks of money for the same benefit.
Underwriting is somewhat stricter than for an advance and it takes a few days longer. Funders are extending an ongoing commitment rather than a single transaction, so they look harder at consistency and typically want more time in business.
Who it fits — and who it doesn't
Good fit when
- A cash gap that recurs — seasonally, or every draw cycle
- You cannot predict exactly when or how much you will need
- You want capacity in place before you need it
- Your business has 12+ months of history and steady deposits
- Inventory or payroll cycles that repeat through the year
Wrong tool when
- You need money today and cannot wait a few days
- One-time expense with a known amount and a known end date
- Under six months in business — approval is unlikely
- You would treat available credit as spending money
The cost, plainly
Cost is charged on what you draw. Because you are only paying while the money is out, the effective annual cost for a recurring need is typically well below repeated lump sums for the same purpose.
Watch for the fees around the edges: draw fees, maintenance or non-use fees, and minimum draw requirements. A line with a low headline rate and a per-draw fee can cost more than it appears if you draw frequently in small amounts.
Ask for the total cost of a representative year of use — how you would actually use it — rather than comparing headline rates.
Rates and terms are set by the funding partner and vary based on your business. Nothing here is an offer of credit.
Businesses that use it
Straight answers
Is a line of credit harder to get than an advance?
Generally yes. Funders are committing to ongoing availability rather than a single transaction, so they want more time in business, steadier deposits and cleaner banking. Twelve months of operating history is a realistic floor for most line products.
Do I pay anything if I do not draw?
It depends on the product. Some lines carry a maintenance or non-use fee, some do not. Ask specifically, because it changes the calculation for a line you are setting up as insurance rather than to use immediately.
Can I have a line and an advance at the same time?
Sometimes, but disclose both to everyone. Undisclosed positions are the single most common reason a file falls apart at the last stage, and they surface in the bank statements regardless.
Does the limit go up over time?
Often, with a clean repayment history. Many funders review periodically and increase limits for accounts that draw and repay consistently. Using a line well is one of the more reliable ways to build capacity for later.