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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.
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:
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.
Usually up to 12 months, but sometimes longer.
You can usually pay off what you owe earlier to save money on interest.
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:
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.
Some lenders can open a commercial line of credit in less than 2 hours if your application is approved.
Most lenders will allow you to track how much you have borrowed online, so you can check a live balance at any time.
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.
This is based on your business turnover, assets and finances. Credit facilities can offer limits from £1,000 up to over £500,000.
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