Compare Business Lines of Credit

We help small businesses find flexible funding – fast.

View options from leading providers.
Start your application.

Apply online for a revolving credit facility, and get a quick decision.

Female cafe owner opening a business savings account

Business Line of Credit

Business Lines of Credit UK

A business line of credit, also known as a business credit line, is a flexible pot of funding that can work as a safety net, covering short-term gaps in cash flow or unexpected expenses.

What is a business line of credit?

A business line of credit allows you to borrow money up to a set limit, as and when you need it. Unlike a standard business loan, which gives you a lump sum of money upfront, you can dip into a line of credit and only pay interest on the amount you borrow.

» COMPARE: Best business loans

How does a business line of credit work?

In most cases, a business line of credit is a form of revolving credit, which means you can borrow up to your credit limit, repay and borrow again, without having to reapply each time. As soon as the money is repaid it’s available to borrow again. As long as you make the minimum repayment, you can choose how much to repay – but you will pay interest on whatever you borrow. Interest rates are usually variable, and you can expect to make a repayment each month, although the minimum amount will vary depending on how much you borrow.

What types of business credit lines are there?

Secured

You may need to offer an asset as security in order to qualify for a business line of credit – or at least to secure a more favourable interest rate. This reduces the risk for the lender, but does mean that your asset will be at risk if you fail to make your repayments.

Unsecured

This doesn’t require an asset to be used as collateral. This can simplify the application process but may mean being offered a lower credit limit and higher rate of interest.

Revolving

This means you have ongoing access to credit, up to a set limit – so as soon as you pay it back, it becomes available to borrow once again.

» MORE: Types of business loan

Does my business need a line of credit?

A business credit line could suit your business if you need a flexible safety net. It can be useful for businesses that see ups and downs in cash flow, and a more practical alternative to taking out a new loan each time you need funds.

You can use a business line of credit to cover gaps in cash flow, which can be particularly useful for seasonal businesses. Funds can also be used for payroll, tax bills, or as a financial buffer.

What are the pros and cons of taking out a business credit line?

Pros	Cons
Business lines of credit are flexible, allowing you to borrow as much or as little as you need.	It can become a permanent borrowing situation if you end up using it long term.
You only pay interest on what you borrow.	Rates vary between providers, and you might struggle to get a good rate with a limited credit or turnover history.
Can be secured or unsecured depending on your circumstances.	Credit limits are likely to be lower than what you could get with a traditional business loan.

How much does a business line of credit cost?

The cost of your business credit line will depend on the interest rate plus any charges involved, such as setup or arrangement fees or fees per transaction. Interest rates can vary, and lenders will consider your turnover, business credit history and revenue forecasts when setting your rate and credit limit.

Remember, you’ll only pay interest on what you use, not the whole credit limit you’re given. Some lenders may only charge interest and others may only charge a fee per transaction.

» MORE: Business loan calculator

Is my business eligible for a business line of credit?

Generally speaking, to qualify for a business credit line you’ll need to be over 18 and based in the UK. You’ll usually need to share a few details about your business, including your business revenue and forecasts on future earnings. Some, but not all, providers will check your credit history, and most will require a minimum turnover, and trading history of at least 6-12 months.

How to find a business line of credit through NerdWallet UK

We can help you find a business line of credit. Simply use our handy comparison table to check which of our panel of lenders offers a revolving credit facility, then simply click and apply.

» MORE: Find a business line of credit

What are the alternatives to a business line of credit?

Business lines of credit are often compared to business loans and business credit cards, but they work slightly differently to both:

Business line of credit vs business loan

A business loan will give you a lump sum that you repay plus interest, in instalments, over an agreed period. It doesn’t offer a flexible pot of funding you can borrow from when you need, so you’ll need to pay interest on the entire sum.

Business line of credit vs business credit card

A business credit card is designed for spending, tracking expenses and building credit – and you can avoid paying interest at all if you pay back what you owe in full by the due date. It’s designed for everyday expenses, while a line of credit sits halfway between a credit card and a loan.

Other alternatives

You might also want to consider other business finance alternatives:

Asset finance is a form of business borrowing used to pay for business assets like machinery, equipment or vehicles, usually by spreading the cost over time or leasing the equipment from a lender.
Invoice finance is a secured form of finance based on unpaid invoices that lets you access up to 90% of your unpaid invoices’ value up front.
Merchant cash advances are loans that you repay as a percentage of future card sales, plus fees. Unlike loans, the amount you repay can change in line with your card takings.
VAT loans are designed specifically to spread the cost of quarterly VAT payments to HMRC, rather than paying a lump sum every three months.

Yes, you may still be able to qualify for a business line of credit if you have a poor or limited credit history, but it’s likely you’ll face higher borrowing costs, lower credit limits, and have fewer options. Your options may widen if you choose to offer an asset as security for the loan, reducing the risk for the lender.

New businesses may be able to access lines of credit, but without a trading history lenders may focus more on forecasts and business plans as well as your personal credit score. You may also be required to give a personal guarantee or offer an asset as collateral for the credit line. New businesses and startups might want to consider a startup loan as a more realistic funding option.

The exact credit limit you get will depend on your business circumstances as well as your provider, but you can find lines of credit with limits as low as £1,000 and as high as £1 million.

This is a type of business funding which provides a set amount of money for a set period of time. Unlike a revolving line of credit, once you’ve used it and repaid it, you won’t be able to use it again without submitting a new application.

The main risk is borrowing more than you need. It’s important to resist the temptation to max out your credit line, and always have a plan for how you will manage the repayments. Don’t forget that you will be charged interest and sometimes fees, all of which can add up and increase the amount you owe.

If your line of credit is secured against an asset, you risk losing this if you don’t keep up with the repayments.

Image source: Getty Images

Dive even deeper