Line of Credit

A business line of credit functions similarly to a credit card, providing access to a designated amount of funds.

Businesses can draw from this pool as necessary, incurring interest solely on the withdrawn amount rather than the entire credit limit.

Certain lines of credit may have a fixed expiration date, while others are structured as revolving lines. In the case of a revolving line of credit, once the borrowed funds are repaid, they can be accessed again without the need for a new application.

A line of credit differs from a credit card in several key aspects. Business credit cards are typically unsecured, meaning that no collateral is required to mitigate the lender's risk.

Consequently, this often results in higher interest rates and fees for the borrower. In contrast, business lines of credit may be secured, allowing the borrower to provide collateral. This can lead to lower interest rates and the potential for larger withdrawal amounts.