What is a business line of credit?
A business line of credit is a revolving credit facility that lets you draw funds as needed, repay, and draw again. Interest is charged on the amount you use, making it a flexible tool for short-term working capital needs.
How does a line of credit differ from a term loan?
A line of credit is revolving and best for recurring short-term expenses, while a term loan provides a lump sum repaid over a fixed schedule—often used for long-term investments like equipment or expansions.
What are typical business credit line rates?
Rates vary by lender and risk but often follow an index (like Prime) plus a margin. Strong, secured profiles may see lower margins; unsecured or higher-risk profiles may pay higher rates and fees. Always compare APR equivalents.
Is an unsecured business line right for my company?
An unsecured business line can fit companies with strong cash flow that prioritize faster access and lighter documentation. If you want lower rates and a higher limit and have assets to pledge, a secured line may be more suitable.
What can I use a business line of credit for?
Common uses include payroll, inventory purchases, supplier discounts, marketing campaigns, and bridging receivables. It’s not ideal for long-term assets; consider a term loan or equipment financing instead.
How much of my line should I use?
Many companies target utilization they can repay within 30–90 days. Keeping usage at a manageable level supports renewal, reduces interest, and maintains flexibility for surprises.
Can I get an SBA-backed line of credit?
Potentially. SBA CAPlines offer working capital solutions for eligible businesses. Review eligibility and terms on the SBA website and compare with non-SBA options.
