What is a business line of credit?
Business line of credit: A business line of credit is a revolving credit line a business can draw from as needed, up to a limit, paying interest only on what it uses.
As you repay what you have drawn, that credit becomes available again. Lines of credit are often used for uneven cash flow, inventory or short-term needs, while a term loan provides a lump sum for a specific purpose.
Lines may be secured or unsecured and often have variable rates. Some charge draw fees, maintenance fees or require periodic reviews.
When you compare offers
Compare the rate, every fee and the review or renewal terms with what a term loan would cost for the same need.
Related guides
- Business Line of Credit vs. Term Loan
How a business line of credit differs from a term loan, which needs each one tends to fit, and what to compare in cost and repayment before you choose.
- What Lenders Look At for Small Business Loans
The factors lenders commonly review for small business financing, the main types of business loans, and how to compare offers by total cost rather than payment alone.
This glossary is for general educational purposes and isn't financial, legal or insurance advice. Lendara is not a lender and does not make credit decisions. Lendara is a free online marketplace that connects you with participating lenders and providers, who set their own eligibility rules, rates, fees and terms. Lendara may receive compensation from partners, which may affect which offers appear and their order.