Business Lines of Credit: Flexible Financing for Modern Companies

In today’s fast-moving economy, businesses need more than traditional loans. They need flexible financing options that allow them to manage cash flow, cover unexpected expenses, and seize new opportunities.

That’s exactly what a business line of credit offers: a revolving pool of funds that businesses can borrow from whenever needed. Unlike fixed-term loans, you only pay interest on the amount you actually use.

This guide covers what business lines of credit are, how they work, their benefits, and how to qualify.

What Is a Business Line of Credit?

A business line of credit (LOC) is a financing solution that works like a credit card. Lenders approve you for a set credit limit (e.g., $50,000), and you can draw funds as needed. Once repaid, the funds become available again.

Two types of LOCs:

• Secured line of credit: Backed by collateral such as inventory or accounts receivable.
• Unsecured line of credit: No collateral required, but usually smaller limits and higher interest rates.

How Does a Business Line of Credit Work?

1. Apply and get approved for a set limit.
2. Withdraw only what you need (via bank transfer or business credit card).
3. Pay interest only on the borrowed amount.
4. Repay funds to restore your available credit.

Example: If your business has a $100,000 LOC and you borrow $20,000, you’ll pay interest only on the $20,000—not the entire $100,000.

Benefits of a Business Line of Credit

Flexibility – Borrow as much or as little as needed
Improved Cash Flow – Cover payroll, inventory, or emergency expenses
Revolving Credit – Funds refresh as you repay
Only Pay for What You Use – Save money vs. fixed-term loans
Helps Build Business Credit – Consistent repayment strengthens your credit profile

Business Line of Credit vs. Business Loan

Feature	Business Line of Credit	Traditional Loan
Structure	Revolving	Fixed term
Repayment	Flexible	Monthly fixed payments
Interest	Only on borrowed funds	On full loan amount
Best For	Ongoing expenses, emergencies	Large, one-time purchases

Common Uses for a Business Line of Credit

• Managing seasonal cash flow
• Covering unexpected expenses
• Buying inventory in bulk
• Handling payroll gaps
• Marketing or advertising campaigns
• Bridging receivables until clients pay invoices

How to Qualify for a Business Line of Credit

To qualify, most lenders require:

• At least 6–12 months in business
• Annual revenue of $100,000+ (varies by lender)
• Good personal and business credit scores
• Financial documents: tax returns, bank statements, P&L

Tip: If you’re a startup, a secured LOC may be easier to obtain since collateral lowers lender risk.

Example of a Business Using a Line of Credit

A construction company has a $75,000 LOC. When equipment breaks down, they borrow $15,000 for urgent repairs. They repay within 90 days, and the credit line resets to $75,000.

This flexibility ensures they can handle emergencies without interrupting cash flow.

FAQs

Q1: Is a business line of credit the same as a loan?

No, a loan is a lump sum with fixed terms, while an LOC is revolving credit.

Q2: Do I need collateral?

Not always. Unsecured LOCs are common but may carry stricter credit requirements.

Q3: Can I use it like a credit card?

Yes, many LOCs come with business credit cards for easy access.

Why Get a Line of Credit from Chasewood Financial?

At Chasewood Financial, we help businesses unlock flexible funding solutions:

•  Fast approval in as little as 24–48 hours
•  Competitive rates
•  Credit lines from $25,000 up to $500,000
•  No hidden fees

Apply today for a business line of credit and gain the financial flexibility your company deserves.