A business line of credit is a revolving credit limit your business can draw on, repay, and draw on again — and you pay interest only on the balance you have actually drawn, not on the full limit. It is built for timing gaps: payroll due before a customer pays, inventory to buy before the season, a repair that cannot wait for a loan committee. This page is the map of the product: the four kinds of line, what they cost, who they fit, and where each deeper question is answered. LessOwe sells no loans and ranks no lenders — what follows is orientation, not a recommendation list.
General information, not financial advice.
A lender approves a maximum limit. During the draw period you take out money as needed — by transfer, check or card, depending on the lender — and interest starts accruing on each draw the day it lands. Every repayment restores that amount of availability, so a $100,000 line with $40,000 drawn has $60,000 still accessible. When the draw period ends, the line either renews after a lender review, closes to new draws and converts to a repayment phase where the remaining balance amortizes on a fixed schedule, or matures. That draw–repay–redraw cycle is the whole product; everything else on this page is variations on it. The month-by-month mechanics are in how a business line of credit works.
Bank revolving lines are the classic form: interest-only or small minimum payments during a draw period of commonly one to five years, annual credit reviews, and limits set from your financial statements. Unsecured bank lines commonly run from about $10,000 to $250,000 (Bank of America), priced at a variable rate — usually prime plus a margin.
Online per-draw lines (the Fundbox/Bluevine/OnDeck class) skip the draw-period structure: each draw becomes its own short repayment schedule, typically 12–52 weeks or 6–18 months. Approval is faster and floors are lower — published online limits run from about $1,000 to $250,000 (Lendio) — but the price is higher and the flexibility of a true revolving period is traded away.
Asset-based (borrowing-base) lines are secured by receivables and inventory. Your available credit is not a fixed number: it is recomputed from a borrowing-base certificate you file — typically around 80% of eligible receivables plus a smaller share of inventory, minus reserves. These lines scale with your sales ledger and carry the heaviest reporting burden of the four kinds. The sizing math is in how much of a line can you get.
SBA CAPLines are 7(a)-guaranteed lines for short-term and cyclical working capital, with a maximum loan amount of $5 million (SBA.gov). The program has four sub-lines: Seasonal (finances the receivables and inventory build-up of a seasonal business), Contract (funds the costs of specific contracts), Builders (for small contractors building or rehabilitating property for resale), and Working Capital (an asset-based revolving line for businesses that cannot meet standard credit terms, repaid as short-term assets convert to cash).
Most business lines carry a variable rate — prime plus a margin — so the rate moves with the prime rate over the life of the line. On top of interest there is a fee stack to check in any offer: draw fees (often 1–3% of each draw), an annual or maintenance fee (often under $200 at banks), origination fees at some lenders, and unused-line fees on larger facilities. The interest itself accrues only on the drawn balance, usually computed on average daily balance. The full anatomy — with one draw priced line by line — is in line of credit interest and fees, and current rate ranges across loan types are tracked in our average business loan interest rates snapshot. To price a specific draw, use the line of credit calculator.
A line fits recurring, uneven timing gaps: receivables that arrive 30–60 days after payroll, seasonal inventory builds, bridging a signed contract’s upfront costs. It does not fit large one-off purchases with a known payoff horizon — equipment, vehicles, real estate — where a term loan’s lump sum, fixed schedule and usually lower rate is the right tool; the side-by-side cost comparison is in line of credit vs term loan. It also is not a fix for a business that is short every month rather than mistimed: a line smooths cash flow, it does not create it, and a balance that never comes down is the warning sign.
Expect the limit you are first offered to be a starting point, not a verdict on your business. Lenders size lines from revenue, receivables and collateral, and young or thin-file businesses start smaller and grow the limit on a clean draw-and-repay record. If the number you are offered looks disconnected from your revenue, the sizing logic behind it — and how to raise it — is in how much of a line can you get.
Most small-business lines are reviewed — commonly annually — and a lender can reduce the limit, decline renewal, or freeze draws where the agreement allows, even if you have never missed a payment. A line is a facility, not a promise. What triggers a cut, what the first moves are, and how to replace a line are covered in what to do if your line is frozen or reduced.
What is a business line of credit? A revolving credit facility with an approved maximum limit. You draw what you need, when you need it, pay interest only on the outstanding drawn balance, and regain availability as you repay. It is the structure U.S. Bank, Chase, Bank of America and every other major provider describes in their own explainers — the differences between lenders are in limits, pricing, fees and how the draw and repayment phases are run, which is what this cluster covers.
How does a business line of credit work? You are approved for a limit, draw funds during the draw period (interest starts the day of each draw), make minimum or interest-only payments while you carry a balance, and — when the draw period ends — repay the remaining balance on a fixed schedule unless the line renews. The full lifecycle, including how interest is billed and what happens at conversion, is walked through in how a business line of credit works.
What’s the difference between a line of credit and a loan? A loan disburses the full amount once and charges interest on all of it from day one, repaid on a fixed schedule. A line of credit lets you draw in pieces and charges interest only on what is outstanding, and repayments restore your ability to borrow again. Chase’s own comparison makes the same distinction. Which one is cheaper depends entirely on how much you carry and for how long — line of credit vs term loan prices the same need both ways.
Sources: SBA.gov CAPLines program pages (four sub-lines, $5M maximum, maturities); Bank of America business line of credit pages (unsecured limit range); Lendio line of credit guides (online limits, fee ranges); U.S. Bank and Chase line of credit explainers and FAQs; PNC line comparison table (fees and minimum payments). Currency verified 2026-10-23.