A revolving limit you can draw against whenever you need it, and pay interest only on what you have actually drawn. Once repaid, the limit is available again.
You are approved for a maximum limit. Drawing $20,000 against a $100,000 limit means you owe and pay interest on $20,000 — the remaining $80,000 costs you nothing while it sits unused.
As you repay, the limit replenishes and can be drawn again. That makes a line fundamentally different from a term loan: a loan is one lump sum with one schedule, while a line is standing capacity you can use repeatedly without reapplying.
A line earns its keep when the timing or size of the need is uncertain. If you know you need exactly $80,000 for one machine, a term loan is usually cheaper and simpler. If you need to cover payroll gaps, restock inventory unpredictably, or bridge slow-paying customers, the flexibility is worth more than the certainty.
A line of credit carries interest on the drawn balance, so unlike a factor-rate product, the total cost genuinely falls when you repay early. Ask about any draw fee, maintenance fee, or minimum draw before you sign — those, not the headline rate, are usually what separate two otherwise similar offers.
Interest applies only to the balance you have actually drawn. Some lines carry a maintenance fee, so confirm the full fee schedule before signing.
A term loan is a single lump sum on a fixed repayment schedule. A line is a reusable limit you can draw from repeatedly, paying interest only on the drawn portion.
Often yes. We generally look for at least six months of operating history and consistent deposits; younger businesses may qualify for revenue-based financing instead.
