Business finance
Business Line of Credit
A business line of credit or overdraft facility is a very flexible form of lending where you have cash available from a lender for you to draw down on as and when you need it, at previously agreed upon terms.
Loan size
$15K To $2M
loan term
6 months to 3 years
Interest rate
5% to 15%
Approval speed
Fast
Business line of credit
Key features of a business line of credit
Maintaining a business line of credit allows your business to be nimble in the event of a sudden business opportunity or large order while simultaneously reducing business risk should any unforeseen or emergency expenditures occur.
Compare a business line of credit
Advantages and disadvantages
Businesses that operate in industries that experience highly seasonal revenues find a line of credit especially useful to balance cash flows.
Advantages
What are the advantages of a business line of credit
- Highly flexible form funding
- Allows for early repayments of dent
- Straightforward application process
- Pay only for what you use
Disadvantages
What are the disadvantages of a business line of credit
- Fees may be applicable even for undrawn facilities
- Lender can cancel facility at any time
Common uses and good to know
Everything else about a business line of credit
Common uses
The flexible nature of this type of loan makes it ideal to provide capital for unexpected opportunities or to cover emergency expenditure or short term cashflow shortfalls.
You only pay interest on the amount you draw down.
A line of credit will allow you to repay your debt at any time and then draw down again in the future.
A credit card is essentially an expensive form of a line of credit.
Good to know
There may be fees applied to set up or maintain a line of credit even if it is never used.
Interest rate jumps dramatically if you draw down in excess of the agreed upon amount.
The line of credit may also introduce some funding risk as the bank or lender can cancel the facility at their discretion.
Alternative Commercial Lending options
Other Business Finance Products
Secured Business Loan
A secured business loan is a loan made by a bank or finance company where the lender requires the borrower to pledge assets as collateral against the loan.
Unsecured business loan
Unsecured business loans are loans made without requiring business collateral such as property or inventory.
Trade finance
Trade finance is any form of finance that is issued to support international trade, including letters of credit, debtor finance, & export credit.
Using Debtor Finance to Manage Business Cash Flows
Any business owner knows the importance of managing cash flows to ensure that liquidity remains strong and that the business has the ability to take advantage of sudden growth opportunities or big contracts. Late payments impact businesses severely as cash that could otherwise be reinvested in growing stock, marketing or
Business line of credit FAQ
Frequently asked questions
Traditional bank lenders prefer to see borrowers who have at least two years of operating history to qualify for a business line of credit.
A larger line of credit will require collateral such as a property or other significant asset.
A start up would in general only be eligible for a business line of credit if the founder posts collateral and/or a personal guarantee.
