Business Line of Credit

What is a business line of credit?

In most layman terms, a business line of credit is similar to a credit card. With a line of credit, a lender provides an ongoing commitment to a business by setting up a credit limit to use it based on their requirements. The lender only charges interest on the funds utilised by the business.

Business owners can greatly benefit from having a line of credit by allowing more flexibility to a business in terms of managing cash flows. It is considered an essential product for any business especially in emergency situations. Business line of credit is also referred to as “Revolving Line of Credit ” or simply “Line of Credit” or a “Business Overdraft”.

Business line of credits are good for businesses which have short term cash flow fluctuations and can be very economical if utilised efficiently.

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Critical Information Sheet

Borrowing Limits
Loan Amount10k- $750k
TermUp to 5 years
Can be used for
  • Buying stock/Inventory
  • Paying wages/rent
  • Marketing & advertising
  • Manage cash flow fluctuations
  • Other working capital needs
RepaymentsWeekly/Monthly amortised over a period of time
SecurityMay be required after a certain amount
Pre-Approval Time24 hours – 48 hours
Unconditional Approval and Settlement Time1-3 days
Low Doc Approval and Documents required
  • Up to $250,000 basis
  • Last 6 months bank statements
  • ATO statements
  • A valid identification proof
Full Doc Approval
  • More than $250,000 basis additional docs
  • Financial statements
  • Others as required
Interest RatesStarts from 7.99% p.a.
  • Flexibility and control.
  • Can save interest if used efficiently
  • Redraw facility
  • No early repayment penalty.

*The information provided in critical information sheet is intended as a guide only. Please contact us for more information

Types of line of credit

Generally, there are 2 types of a line of credit.

Revolving line of credit

A revolving line of credit means the line of credit is an open-ended credit account. This allows borrowers to draw the money and repay it as many times during the tenure of the facility. In most cases, a line of credit is offered as a revolving line of credit.

Non-Revolving line of credit (Fixed)

A Non-Revolving line of credit functions the same as a revolving line of credit. However, an exception is that, there is no option to redraw even after repayments are made. Once borrowers fully utilise the line of credit, the account will be closed.

How does a Line of Credit work?

As a line a credit is a predetermined credit limit that you can draw at any time within the set limit. As money is repaid, you can re-draw the funds again. You don’t have to always use the entire limits. Rather, you can assess how much money you want to spend using the line of credit as per your business needs and only pay interest on the amount you draw, not on the whole credit line. Some lenders offer the option to amortize the repayments of the limit utilised up to 4 years to suit your business cash flows. You have the option to repay the entire outstanding balance at once as well.

Line of credit illustrated by an example

Assume you are a small business and need funds on an ongoing basis to pay wages, rent, bills, cover unpaid invoices, buying stocks, paying suppliers etc. Based on your business and cash flow assessment a lender approves a business line of credit of $100,000.

Now you have flexibility to use the available funds up to $100,000 any point and any number of times.

Say in month 1, you just drew $25000, and paid back the same within 20 days of withdrawal. Here, you’ll be charged interest on $25,000 for 20 days only irrespective of having a limit of $100,000.

Now say in month 2, you used the entire $100,000 and paid back $50,000 within 15 days. Again after 5 days you used another $25,000 and paid back the entire $75,000 in 10 days. Here, you’ll be charged interest on $100,000 for 15 days, then on $50,000 for 5 days and on $75,000 for 10 days.

Also, though you had a business line of credit limit of just $100,000 but overall utilisation for the month was $125,000. Hence, you can maximise your utilisation by efficiently churning the funds.

You also have an option from few lenders to get every drawing amortised over a period of time and pay weekly/monthly instalments.

What are the advantages and disadvantages of taking a Business Line of Credit



Business Line of Credit, Invoice Financing and Debtor Finance compared

Although other financing options such as Invoice Financing and Debtor Financing may work closely as a Business Line of Credit on a fundamental level, there are differences you should know before choosing one. The key features and differences can be seen as below.

Line of Credit

Invoice Financing

Debtors Financing

Business Line of Credit versus Business Term Loan

Although other financing options such as Invoice Financing and Debtor Financing may work closely as a Business Line of Credit on a fundamental level, there are differences you should know before choosing one. The key features and differences can be seen as below.

Business Term Loan

Business Line of Credit

What documents are required to apply for a Business Line of Credit?

Low Doc

Generally, you can get limits up to $250k, basis low documentation. You only need to provide the following documents in most of the cases.

Full Doc

For a business line of credit more than $250k, you may require submitting the following additional documents

How much business line of credit can I borrow?

The borrowing credit limit for a line of credit depends on various factors

Financial strength

Generally, lenders will consider the maximum line of credit amount by evaluating a business’s cash flow and how quick it can repay the borrowing amounts it utilises. A higher average monthly revenue can provide you access to greater maximum amount of line of credit

Time in business

To lenders, “time in business” could be evaluated as a factor of the momentum in the business. Usually, lenders assume businesses that have been operating for more than a year are more likely to take on more debt obligations and have much more balanced cash flow activities.


Though you can get a business line of credit up to a certain limit without any security, the lenders place higher weightage if a business or its directors are asset backed. It helps them in getting a higher loan amount with better terms.


The maximum amount of line of credit that is approved may differ based on the industry that a business operates in. This is because every industry has different methods of collecting payments from their customers. If your business is mainly selling products directly to end-users (B2C), you may collect payments in cash or credit card, which provides you with an immediate source of revenue, which is usually favoured by lenders. On the other hand, if your business mainly makes commercial transactions with other businesses (B2B) where invoices are often used, the delay payments may be seen as a risk by lenders, which could impact the maximum amount of line of credit you can borrow.

Credit history

For an unsecured line of credit, borrowers’ credit score becomes a significant factor for consideration of the loan amount. A higher credit score means more confidence for the lender to approve a higher maximum amount of line of credit, and vice-versa.

With all being said, please do not let the factors discussed above intimidate you to reach out to us. Broc Finance believes every company has unique strengths on its own and we are here to help you to present them effectively to the lenders so that you secure the business loan you need.

What Our Clients Say

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FAQ's About Business Line of Credit

A business line of credit is similar to having a credit card limit. You would be approved a line of credit limit at the start of the loan. Once the limit is set, you can utilise part or full of the funds as required and pay it back whenever you wish. You would be charged interest only for the period of utilisation of the funds.

A business line of credit could not necessarily be a right fit for any business. It all depends on the nature and term of funds requirement into your business. If your business has seasonal fluctuations in cash flow and you do not require the funds on an ongoing basis, a business line of credit would be the right product for your business as you would have to pay interest only when you utilize the funds. However, if a business has an ongoing requirement and you are likely to utilize the funds throughout the year, a business term loan could be a better product as the borrowing costs may come cheaper as compared to a business line of credit loan. Please feel free to reach out to us on 1300 253 041 or send us a message in case you wish to know more.

A business line of credit may have the following borrowing costs:

Interest cost: Interest charged on the funds utilised.

Line fees: There may be a small monthly/weekly/Annual fee charged by the lenders for facilitating you a line of credit throughout the term of the loan irrespective of your utilisation. This fee is charged on top of regular interest incurred on utilisation of funds.

Drawdown Fees: Some lenders may charge a small drawdown fee on each drawdown instead of line fees. This fee is charged on top of regular interest incurred on utilisation of funds.

Most of the lenders calculate the interest on a daily utilization basis and charge monthly to the accounts.

Lenders may require you to pay the interest plus a percentage of the principal drawn on a weekly/fortnightly/monthly basis or simply amortize each drawing over a period of time (similar to term loan). Alternatively, they may give you an option to amortize it over a period of time.

Generally, the term of a business line of credit range between 1 year to 5 years. Few lenders also provide a rollover facility at the end of the term.

A business line of credit may not always be the right option for your business as you may have a fixed term loan requirement, or an instalment repayment structure would be more suitable to the cash flow of the business. There are various alternative business loan options which we can help you with. Some of the popular options are unsecured business loan, secured business loan, debtors finance and invoice finance facilities. Please reach out to us on 1300 253 041 or send us a message. One of our lending specialists would get in touch in no time to assist you.

Lenders would run a credit check only after obtaining a consent from you.

At Broc Finance, we endeavour to get the most adequate facility suitable to the business requirements of our clients. In most of the cases logged in through us, we try to get an indicative offer from the lender for our client’s consideration before proceeding with formal application and consent to credit check. This approach helps our clients to avoid unwanted rejections and credit checks which can significantly impact their credit score.

We would be happy to answer, if you have any other questions. Please contact us.

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by getting your asset finance, property finance and unsecured business loans, without the frustrations of the bank process.