Business Line of Credit Guide: How It Works and When to Use It (2026)

How a Business Line of Credit Works

A line of credit gives you access to a set amount of capital that you can draw from as needed. You pay interest only on what you draw, not the full credit limit. Revolving lines replenish as you repay, giving you ongoing access to capital. Non-revolving lines (sometimes called draw facilities) do not replenish — once you have drawn the full amount, the facility closes. Most small business lines of credit are revolving.

How to Qualify for a Business Line of Credit

Requirements vary significantly by lender. Online lenders may approve lines with 6+ months in business, $50,000+ in annual revenue, and a 600+ credit score. Traditional banks typically want 2+ years in business, $100,000+ revenue, 680+ credit score, and a track record of account management. Lines above $250,000 usually require collateral. Start with a smaller line to build history, then request increases as your relationship matures.

Using a Line of Credit Strategically

A business line of credit is designed for short-term cash flow gaps, not long-term capital needs. Use it to bridge receivable cycles, take advantage of supplier discounts, or manage seasonal inventory purchases. If you find yourself rolling a balance for more than 90 days, you are using a line of credit for a need better served by a term loan. Keeping the line lightly utilized also helps your business credit score.

Frequently asked questions

Is a business line of credit the same as a credit card?

Similar in structure but not the same — lines of credit typically have higher limits, lower rates, and draw funds directly to your bank account rather than a card.

Does an unused line of credit affect my credit score?

Having an open line improves your credit utilization ratio, which generally helps your score as long as you are not drawing heavily on it.