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Business Lines of Credit Pros & Cons

business line of credit

“Looking for immediate financing for your business? We’ll help you decide if a business line of credit might be a good option for you.

What is a Business Line of Credit?

business line of credit is a financing option that falls somewhere between a business credit card and a term loan. Virtually the only similarity that a line of credit has to a small business loan is that it gives access to funds that can be used for day-to-day expenses. Otherwise, a business line of credit is more like a credit card. You don’t have a sum deposited into your account which you then repay with interest on a regular basis. Instead, you draw funds as you need them and accrue interest each time. Lines of credit are also revolving, like credit cards, which means that the amount you repay becomes available again. As with credit cards, your lender will determine a maximum up to which you can withdraw funds at any given time.

Available Lines of Credit

There are several ways to categorize business lines of credit. First, there are secured and unsecured options. These differ based on whether you’ll need to provide collateral. For a secured loan, the lender will have some asset to claim in the case that you default, so you might find that you’re eligible for larger amounts at lower rates. On the flip side, unsecured lines of credit can be quicker and easier but also present more risk to the lender so they can be more expensive.


Some of the biggest advantages of a business line of credit are that you only pay interest on the funds you use and that the capital is available whenever you need it. You can use the proceeds for a wide variety of business purposes to help maintain your cash flow, from operating expenses to purchases to emergency funds. Another benefit is that most businesses are eligible, even if they’re young or don’t have the highest credit scores. Being consistent and timely with your interest payments can also help you build your business credit so you can work towards obtaining the lowest cost funding options in the future.


The most glaring drawback of business lines of credit is that they can have high interest rates, especially for borrowers with lower credit scores. While they can come in handy for immediate, short-term business needs, they can become costly over time as you withdraw more capital.

If you don’t need emergency capital, consider applying for a more affordable business financing option.”

SmartBiz Team

Check out our Business Line of Credit Page or our Commercial Finance Page for all our other commercial finance options.

Contact us or call on 02 9453 0300 so we can talk you through the available options.