A business line of credit is the most flexible funding a business can have. Instead of a one-time lump sum, you get a credit limit you can draw from whenever you need it — like a credit card for your business. You only pay interest on the amount you actually use, and as you repay, that credit becomes available again.
Why owners love a line of credit
- Pay only for what you use — no interest on the portion you don't touch.
- Reuse it — a true revolving line refreshes as you repay; no reapplying.
- Always ready — draw for payroll, inventory, or a surprise expense the day it hits.
- Smooth cash flow — bridge slow months and slow-paying customers.
- Flexible repayment — smaller payments during slower periods.
Bank vs. online line of credit (2026)
| Bank line of credit | Online lender line | |
|---|---|---|
| Rate | From about 9% APR, or Prime + 1.75% | From about 6% – 8% APR for strong borrowers, much higher for weaker profiles; some charge a factor rate from 1.06 |
| Limit | $1,000 – $500,000 | $5,000 – $500,000 |
| Repay each draw over | Varies (often revolving monthly) | 6 – 24 months, weekly or monthly |
| Credit score | 680 – 700+ | 580 – 625+ |
| Time in business | 2+ years | 6 – 12+ months |
| Annual revenue | $100,000+ | $100,000 – $200,000+ |
| Speed | Days to weeks | Often 1 – 2 business days |
What a line of credit actually costs: an example
| Example | Amount |
|---|---|
| Credit limit | $100,000 |
| Amount drawn | $30,000 |
| Rate | 18% APR, repaid over 12 months |
| Monthly payment | ≈ $2,750 |
| Total interest | ≈ $3,005 |
| Cost of the unused $70,000 | $0 (check for draw or maintenance fees) |
Market ranges reviewed September 2026. Sources: Bankrate business line of credit comparison. Ranges are typical, not offers; your terms depend on the funding provider.
Line of credit vs. term loan vs. working capital
A line of credit is a reusable limit you draw on as needed — best for recurring or unpredictable costs. A term loan is a fixed lump sum with set payments — best for a specific, planned purchase. Working capital is fast lump-sum cash for an immediate need. Many businesses keep a line of credit open and use working capital when a big opportunity hits.