Revolving Loan

Business Line of Credit

Flexible capital you draw only when you need it

What is business line of credit?

A business line of credit gives you access to a revolving pool of capital you can draw from as needed, repay, and draw again — similar to a credit card but typically with higher limits and significantly lower rates. You only pay interest on the amount you've actually drawn, not the full credit limit. Lines of credit come in two forms: secured (backed by collateral such as accounts receivable, inventory, or real estate — lower rates, higher limits) and unsecured (no collateral required — higher rates, lower limits, faster approval). Interest rates range widely, from 8–13% at banks for well-qualified borrowers to 15–50% from online lenders for higher-risk borrowers. Lines of credit are ideal for managing cash flow fluctuations, covering seasonal expenses, bridging the gap between payables and receivables, or maintaining a financial safety net for unexpected costs or opportunities — without paying for capital you're not using.

How it works

1

You apply with a lender and get approved for a credit limit based on your business financials, creditworthiness, and collateral (if secured). Credit limits typically range from $10,000–$250,000 for unsecured lines and $50,000–$5,000,000+ for secured lines backed by accounts receivable, inventory, or real estate.

2

You draw funds as needed — transfer to your bank account, write checks, or use a linked card depending on the lender. Some lenders allow instant draws, others require 1–2 business day transfers. There is no obligation to draw any funds — you can hold the line at zero balance if you don't need it.

3

You pay interest only on the outstanding drawn balance, not your full credit limit. Some lenders charge interest daily on the drawn balance, others charge monthly. Payment structures vary: some require interest-only payments during the draw period with principal repayment at the end, others require minimum payments of principal plus interest monthly. Understand the repayment structure before signing — an "interest-only" line can result in a large balloon payment if you don't actively pay down the balance.

4

As you repay, the credit becomes available again — this is what "revolving" means. Most lines of credit have a draw period (typically 12–24 months for online lenders, 1–5 years for bank lines) during which you can draw and repay freely. At the end of the draw period, some lines renew automatically (subject to the lender's review of your financials), others convert the outstanding balance to a term loan, and some require full repayment. Understand what happens at the end of the draw period before you sign.

Best for

Businesses with seasonal or cyclical revenue that need to smooth cash flow — draw during slow months, repay during strong months

Companies that want capital available on-demand for unexpected opportunities (a large order, a bulk discount from a supplier, an equipment deal) without applying for a new loan each time

Businesses managing the gap between paying suppliers and collecting from customers — particularly common in B2B businesses with net-30 to net-90 receivables

Established businesses building a financial safety net — a line of credit costs nothing until you draw, making it the lowest-cost form of standby capital

eCommerce and retail businesses funding inventory purchases ahead of peak seasons without committing to a fixed-term loan

Construction, staffing, and professional services businesses with project-based revenue where cash flow is uneven between project milestones

Requirements

Primary requirementDemonstrated ability to service revolving debt — lenders evaluate your cash flow patterns, revenue consistency, and existing debt obligations to determine both eligibility and credit limit. Unlike term loans where the asset being purchased serves as collateral, a line of credit requires the lender to trust your ongoing cash flow
Time in business1+ year for bank lines, 6+ months for online lenders (some online lenders accept 3+ months with strong daily revenue)
Annual revenue$100,000+ for online lenders (some accept lower), $250,000+ for most bank lines, $500,000+ for larger secured facilities
Credit scoreVaries significantly by lender type. Bank lines: 680+ (700+ for the best rates). Online lenders: 600+ (some accept 550+). The rate you receive is heavily tied to your credit profile — a 680 score might get 15–20% from an online lender vs. 8–12% from a bank
Collateral (secured lines)Accounts receivable, inventory, equipment, or real estate. Secured lines offer higher limits and lower rates. The lender typically advances 70–85% of eligible AR and 50–70% of eligible inventory. A blanket UCC lien on business assets is standard for secured lines
Collateral (unsecured lines)No collateral required, but the lender may still file a UCC lien on general business assets, and a personal guarantee is almost always required. Unsecured lines typically cap at $100,000–$250,000
Key documentsIncome/Profit & Loss statement (monthly), balance sheet (monthly), cash flow statement (monthly), debt schedule, accounts receivable aging report, articles of incorporation, business tax returns, bank statements (3+ mo), government-issued ID, invoices
Existing debtLenders will review all existing obligations including term loans, MCAs, other lines of credit, and credit card balances. Heavy existing debt reduces the credit limit offered and may disqualify you. If you have outstanding MCAs, many bank lenders will decline the application — consider refinancing the MCA first

Frequently asked questions

A term loan gives you a lump sum upfront that you repay on a fixed schedule — you pay interest on the full amount from day one. A line of credit gives you a credit limit you can draw from and repay repeatedly, and you pay interest only on what you've actually borrowed. Think of a term loan as buying a specific amount of capital and a line of credit as having capital available on demand. The cost structure is different too: term loans have a defined total cost you can calculate upfront, while a line of credit's total cost depends entirely on how much you draw and for how long. If you know exactly how much you need and when, a term loan is typically cheaper. If your capital needs are unpredictable or recurring, a line of credit is more flexible and avoids paying for idle capital.
The cost depends on three variables: the interest rate, how much you draw, and how long you hold the balance. Interest rates range from 8–13% at banks for well-qualified borrowers to 15–50% from online lenders for higher-risk profiles. You pay interest only on the drawn amount, not the full credit limit — so a $200K line at 15% where you draw $50K for 3 months costs approximately $1,875 in interest, not $30,000. Additional fees may include draw fees (0–2% per withdrawal, charged by some online lenders), annual or maintenance fees ($0–$500/year), and in some cases, inactivity fees if you don't use the line. Bank lines typically have lower rates and fewer fees than online lender lines, but require stronger credit profiles and longer approval timelines.
No — you pay interest only on the amount you've actually drawn. If you have a $200K line and draw $50K, you pay interest on $50K. If you draw nothing, you owe no interest (though some lenders charge a small maintenance or inactivity fee on unused lines). This is the fundamental advantage of a line of credit over a term loan: you don't pay for capital you're not using. However, some online lenders structure their lines with mandatory minimum draws or fees that effectively penalize low utilization — review the terms carefully before signing.
Bank lines of credit are very difficult to obtain as a startup — most banks require 2+ years of operating history and established financial track records. Online lenders are more accessible, with some approving businesses with as little as 3–6 months of operating history, though at significantly higher rates (20–50% APR). For startups, a more realistic path to revolving credit is often an SBA Express line of credit (up to $500K with SBA-backed rates), a business credit card (easier approval but higher rates and lower limits), or starting with a small secured line backed by a personal CD or savings account to build a borrowing relationship with your bank.
Secured lines of credit (backed by collateral) offer lower rates, higher limits, and longer terms — but require pledging business assets and involve more documentation and setup time. Unsecured lines require no collateral and are faster to establish, but carry higher rates, lower limits (typically capping at $100K–$250K), and almost always require a personal guarantee. The decision depends on your situation: if you have eligible collateral (strong AR, inventory, equipment, or real estate) and need a larger credit facility at lower cost, secured is the better choice. If you need a smaller standby line quickly and don't want to pledge specific assets, unsecured works. Be aware that even "unsecured" lines often involve the lender filing a UCC blanket lien on your general business assets — "unsecured" means they don't require specific collateral upfront, but they still protect their position.
This varies by lender and is one of the most important terms to understand before signing. Some lines renew automatically each year subject to the lender reviewing your financials — your credit limit may be increased, maintained, or reduced. Some lines convert the outstanding balance to a term loan at the end of the draw period, meaning you can no longer redraw and must repay on a fixed schedule. Some require full repayment at maturity. And some online lenders structure short draw periods (6–12 months) that require you to reapply — effectively making each "line of credit" a short-term loan. Ask three questions before signing: what happens at maturity, what triggers a review or reduction of the credit limit, and under what circumstances the lender can demand early repayment (called "calling the line").

Line of Credit Cost Calculator

See the real cost of a business line of credit and what Laminar can save you.

Cost Breakdown

Total interest (24mo)$18,000
Origination fee$3,000
Broker fee$3,000
Wrong product risk (3.0%)$3,000
Document gathering$200
Application submissions$150
Lender back-and-forth$150
Avg drawn balance (60%)$60,000
Total cost of borrowing$27,500
Laminar saves you
$8,300

30.2% of total cost. No broker fees, no app-by-app submissions, no back-and-forth, no wrong-product risk, and reduced origination fee (down to 1%) via Laminar.

Owner time valued at $50/hr. Actual costs vary.