What Is a Business Line of Credit?

What a Business Line of Credit Is

A business line of credit is a set amount of money a lender approves you to borrow against, on demand, up to a fixed limit. Think of it like a credit card built for business cash flow, but usually with lower rates and higher limits.

You only pay interest on the amount you actually draw, not the full limit. When you pay it back, that money becomes available to borrow again. This is called a revolving line, and it is the feature that makes it so useful for businesses with uneven cash flow.

How a Business Line of Credit Works

A lender approves you for a credit limit, say $75,000. You draw what you need, when you need it. Interest starts only on the drawn amount. As you repay principal, your available credit refills.

Here is a concrete example. You draw $20,000 to cover an inventory order. You pay interest only on that $20,000, not on the full $75,000 limit. Two months later your customer pays you, you repay the $20,000, and your full limit is available again for the next gap.

Lines come as revolving (refills as you repay) or non-revolving (a one-time limit that does not refill). Most short-term working capital lines are revolving. Repayment is typically monthly, and many lines carry a draw period followed by a repayment period.

What You Can Use a Business Line of Credit For

A line of credit is built for timing gaps and short-term needs, not for long-term assets. Common uses:

Covering payroll: when receivables are slow.

Buying inventory: ahead of a busy season.

Bridging the gap: between paying suppliers and getting paid by customers.

Handling surprise expenses: like an equipment repair or a tax bill.

Taking on a bigger order: you could not fund out of pocket.

If you are buying a long-term asset like a building or a major piece of machinery, a line of credit is the wrong tool. Match the financing term to the life of what you are funding.

Requirements and How to Qualify

Lenders weigh time in business, revenue, and credit. Honest ranges:

Time in business: Most lenders want at least 6 months to 2 years. Stronger, lower-cost lines usually require 2+ years.

Annual revenue: Often $100,000 or more, though some online lenders go lower.

Credit score: Bank lines typically want 680+. Online lenders may approve scores in the 600s at higher rates.

Collateral: Some lines are unsecured. Larger or lower-rate lines may be secured by business assets.

Common documents: 3 to 6 months of business bank statements, 1 to 2 years of business tax returns, a P&L and balance sheet when applicable, government ID, business entity documents, and a voided business check.

What a Business Line of Credit Costs: Rates, Terms, and Fees

Pricing depends heavily on whether you qualify for a bank line or an online line. Rates move with the market, so treat these as current ranges, not promises.

Bank or well-qualified lines: roughly 7% to 13%.

Online lines: 15% to 50%+, depending on credit, revenue, and time in business.

For context, the U.S. Prime rate sits at 6.75% as of June 2026, and many bank lines are priced as Prime plus a margin. Watch for structure beyond the headline rate: some lines carry draw fees, monthly maintenance fees, or annual fees. A good broker shows you the full cost before you commit.

Pros and Cons

You pay interest only on what you draw.

It refills as you repay, so it is there for the next gap.

It is far cheaper than most high-cost short-term options when you qualify.

Variable rates can rise if the market moves.

Discipline matters: an always-tapped line becomes expensive permanent debt.

Limits may be lower than a term loan for the same business.

Who a Business Line of Credit is Best for (and Who Should Look Elsewhere)

A line of credit is best for established businesses with recurring, predictable cash flow gaps. If you invoice customers and wait to get paid, or your sales swing with the seasons, a line is one of the most flexible tools you can hold.

Look elsewhere if you need a large one-time lump sum for a specific purchase. A term loan or equipment financing usually fits better and costs less over the life of a fixed asset. If you have been in business under 6 months, you may need to build more history first.

How to Get a Business Line of Credit Through Quordx

Quordx Capital is a funding brokerage, not a lender, and it is free to you, always. There is no application, broker, or processing fee. Quordx Capital is paid a commission by the lender.

You apply online in about 10 minutes. Quordx Capital reads your profile and matches you to 3 to 7 best-fit lenders from a network of 50+ vetted lenders, then submits your package on your behalf. Lender decisions typically come back in 24 to 48 hours, and funding can land in as little as 3 to 7 business days. Quordx Capital serves SMBs in 46 states.

Frequently Asked Questions