Compare Business Credit Lines

A credit line is a source of finance that is available for businesses to borrow from when they're in need of additional capital. Also known as lines of credit, these financial solutions have maximum limits, and give borrowers the option to access as much cash as they need up to that limit.

Credit lines are often used by governments, businesses, and individuals when borrowing flexibility is essential. If you frequently find yourself in a position wherein you're not sure how much you'll need to access, then a line of credit could be the most versatile financial product available to you.

Credit lines are convenient. Once you've been approved, you can borrow cash whenever you need to, and you don't need to access the money immediately following approval. With a credit line, you receive a maximum borrowing limit and as long as you do not exceed that maximum, you can continue to access the money you need. In other words, credit lines are not a one-time solution.

Repayment for credit lines is different to standard loans. In a traditional loan, you generally make a fixed payment each month that is scheduled to last for a specific period of time - perhaps three to five years. With a credit line, on the other hand, you will need to make minimum payments, but you can borrow and repay as much as you like within your agreed limits. Eventually, some credit lines will ask you to slow down your borrowing frequency and begin repaying your debts using a process known as "standard amortising payments". These payments will eliminate the amount you owe over a period of years.

With credit lines, the interest you are expected to pay will begin once you start borrowing. This is good news if you're not using your credit line, or you're great at paying off your debt quickly. In other words, credit lines are great for businesses that know how to manage their money, but may need access to additional finance on a regular basis.

Credit lines are often used as a safety net to help businesses to avoid cash flow issues, but they are rarely the best tool for long-term borrowing or everyday use.

Applying for a line of credit is the same as applying for any other kind of loan. Lenders will determine whether your application should be approved based on various typical lending criteria, including:

A line of credit often has a draw period, and a repayment period. During a draw period, you will be using money from your line of credit. During a repayment period, you will be expected to repay the interest and principal of the loan.

Some credit lines will have closing costs. It's important to factor these fees into your considerations when you are evaluating which lenders and financial products are right for you. They differ from case to case.

As with many loans, credit lines fall into two overarching segments: unsecured and secured. Secured LOCs (lines of credit) are backed by collateral, such as your company's premises, your home, vehicle, or another asset that you or the business owns. Because secured credit lines are less of a risk for the lender, they often come with lower interest rates.

Alternatively, unsecured lines of credit are not backed by collateral. Unsecured LOCs are harder to access and can come with higher interest rates to help counteract the risk for lenders.

When you are applying for any type of credit line, your chosen lender will need to examine your creditworthiness. This means that they will look at your company and your history of being able to pay back loans by assessing your credit score. If you and the business have good credit scores, then your interest rate will be far lower, and your borrowing limit could be increased.