Key takeaways
- Draw only what you need, when you need it.
- Interest is usually charged only on the amount used.
- Ideal for cash-flow gaps, not large one-time purchases.
Best for
Businesses with uneven cash flow or recurring short-term needs.
How it works
You're approved for a maximum limit. Draw what you need, when you need it, and typically pay interest only on the amount you've used.
As you repay, the available balance is restored.
Revolving vs. non-revolving
Revolving lines replenish as you repay. Non-revolving lines close once the limit is used. Ask which one you're getting.
Common uses
Covering payroll gaps, seasonal inventory, unexpected repairs, or bridging slow-paying invoices.
Pros and cons
Advantages
- Only pay for what you use
- Reusable
- Great for timing gaps
Things to weigh
- Rates may be variable
- Some lines have draw or maintenance fees
- Limits can be reduced by the lender
Frequently asked questions
Is a line of credit better than a loan?
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It depends on the need. Lines of credit suit recurring or unpredictable expenses; term loans suit one-time investments.
Are there fees if I don't use my line?
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Some lenders charge maintenance, annual, or inactivity fees. Ask for a full fee list.
Can my credit limit change?
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Yes. Lenders can review lines periodically and may raise, lower, or close them based on your business's performance.
This guide is general educational information, not financial, legal, or tax advice. Terms, requirements, and availability vary by lender and your situation.