Business Lines of Credit: How They Work and Who Qualifies
A plain breakdown of how revolving business credit lines work, what separates them from a term loan, and what lenders check before approving a limit.
Overview
What a business line of credit actually is
A line of credit works more like a credit card than a loan: you get approved for a maximum limit, draw from it as needed, and only pay interest on what you actually use. Once you repay what you've drawn, that amount becomes available again — which is why it's called "revolving" credit.
It's best suited for unpredictable or recurring costs, not one-time purchases like equipment. Below is a breakdown of the two most common structures, followed by typical limits and where to go deeper by industry.
Main types of business lines of credit
Secured Line of Credit
Backed by business assets or a cash deposit. Typically offers higher limits and lower rates in exchange for collateral.
Unsecured Line of Credit
No collateral required, but smaller limits and higher rates. Approval leans more heavily on credit score and revenue.
Seasonal / Operating Line
Common in agriculture and seasonal retail — draws align with a busy season and are repaid once revenue comes in.
Pros and cons of a business line of credit
Pros
- Only pay interest on the amount you actually draw
- Reusable once repaid, without reapplying each time
- Well suited to unpredictable or seasonal cash flow gaps
Cons
- Rates are often variable and can rise over time
- Smaller limits than a term loan for the same credit profile
- Easy to over-rely on for expenses that need a longer-term loan instead
Typical limits
Limits and rates by line type
| Line type | Typical limit | Typical rate | Funding speed |
|---|---|---|---|
| Secured line | $25K–$500K | 7%–14% | 3–10 days |
| Unsecured line | $5K–$100K | 10%–25% | 1–5 days |
| Seasonal / operating line | $10K–$250K | 8%–16% | 3–10 days |
Ranges are indicative and vary by industry, credit profile and lender. See industry-specific pages below for real comparisons.
By industry
Compare loan options for your industry
Rates, typical loan sizes and the best-fit lenders vary a lot by industry. Each page below has a full lender comparison specific to that sector.
FAQ
Common questions
What credit score do I need for a line of credit?
Unsecured lines typically want 600+, since there's no collateral backing the limit. Secured lines can approve lower scores, since the collateral offsets some of the lender's risk.
How is a line of credit different from a credit card?
They work similarly — both are revolving credit. Lines of credit typically offer higher limits and lower rates, and can sometimes be drawn as cash rather than only card purchases.
Do I pay interest if I don't use the line?
No — interest only accrues on the amount you draw. Some lenders charge a small annual or maintenance fee just to keep the line open, so check that before signing.
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