Business Line of Credit: How It Works

Small business owners rely on business lines of credit for short-term money needs. A business line of credit is similar to a credit card in the sense that you are approved for a maximum credit limit. You can borrow and withdraw funds as you need them, up to the limit.

You are charged interest only on the amount you withdraw. As you repay the amounts you borrowed, you free up the line to again withdraw those amounts.

A business line of credit is a popular type of funding. According to the 2020 Small Business Credit Survey (Federal Reserve Banks), 40% of small businesses applying for financing seek out business lines of credit.

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