A line of credit (or revolving business credit) facility is a flexible way for your business to borrow money.

Your business can draw on your revolving credit account when you need extra funds and choose how long you need to pay back what you borrow.

How does a business line of credit work?

They work in a similar way to a business overdraft, but are not directly linked to a business bank account.

You are given a credit limit, can choose to drawdown what you want to borrow when your business needs it, and only pay interest on what you withdraw.

You could use a commercial line of credit to pay for:

  • Wages

  • Rent

  • Tax

  • Other bills and expenses

If you need to borrow a fixed amount you could consider a standard business loan instead, rather than a revolving credit agreement.

How long do they last?

Usually up to 12 months, but sometimes longer.

You can usually pay off what you owe earlier to save money on interest.

How do credit limits work?

The credit limit is the maximum amount you can borrow using the credit facility, but the limit your business will get depends on factors like your:

  • Annual turnover

  • Business assets

  • Credit record

Revolving business credit pros and cons

  • Flexible borrowing

  • Only pay interest on drawdown

  • Quicker than other finance

  • Bad credit applicants considered

  • Interest rates can be higher

  • Some require an asset as security

  • Usually only last 1-2 years at a time

  • May need to submit documents to withdraw

How to get a business line of credit

To set up a flexible line of credit for your business you need to know:

  • How long you need the credit facility for

  • What credit limit you need

Some lenders offer unsecured business line of credit facilities, but others require you to use business assets as a guarantee, so check this before you apply.

Revolving credit FAQs

Q

How long does a business credit facility take to set up?

A

Some lenders can open a commercial line of credit in less than 2 hours if your application is approved.

Q

How can I monitor my credit facility balance?

A

Most lenders will allow you to track how much you have borrowed online, so you can check a live balance at any time.

Q

How will interest be charged on my balance?

A

Interest is normally charged daily on the funds you have drawn down from your credit facility. This interest charge is then applied weekly or monthly.

Q

What will my credit limit be?

A

This is based on your business turnover, assets and finances. Credit facilities can offer limits from 1,000 up to over 500,000.

About our comparison

Q

Who do we include in this comparison?

A

We include revolving credit facilities available directly from lenders and through brokers on our panel. They are all regulated by the Financial Conduct Authority (FCA). Here is more information about how our website works.

Q

How do we make money from our comparison?

A

We have commercial agreements with some of the companies in this comparison and get paid commission if we help you take out one of their products or services. Find out more here.

You do not pay any extra and the deal you get is not affected.