Business Lines of Credit

What is a business line of credit?

A business line of credit sets a maximum amount your business can draw from as needs come up. Instead of receiving one lump sum, you draw what you need, repay it, and — with a revolving line — the repaid amount becomes available to use again.

Interest is generally charged on the amount you've drawn rather than the full limit, though pricing, fees, and terms vary by lender and program. Because funds are there when you need them, a line of credit often works as a standing cushion for short-term needs rather than a way to fund one large purchase.

Common uses

• Managing seasonal swings in revenue and expenses
• Covering short-term gaps between invoicing and getting paid
• Buying inventory or supplies as orders come in
• Handling unexpected repairs or expenses
• Keeping capital on hand for opportunities that come up quickly

Line of credit or term financing?

Term financing provides a lump sum for a defined purpose — such as equipment, an acquisition, or commercial real estate — repaid on a set schedule. A line of credit is better suited to recurring or unpredictable needs. Some businesses use both. Your advisor can help you weigh which structure, or combination, fits your situation.

Who it may fit

Lines of credit are often a fit for established businesses with consistent revenue and ongoing, variable cash needs. Funding sources generally look at business performance, time in business, and credit when setting a limit, so a steady operating history helps.

What information may be needed

• Recent business bank statements, including all pages
• Business tax returns and a year-to-date profit and loss statement
• A schedule of your current business debt
• A photo ID for each owner with 20% or more ownership

Requirements vary by program. You'll only be asked for what a given option actually requires, and documents are collected through a secure upload link — never through this website's forms.