Draw only what you need
Business line of credit
A pre-approved limit you draw from when you need it. You pay interest on what you have drawn, not on the limit sitting there.
Business Line of Credit at a glance
- Amount
- $10,000 to $250,000 limit
- Term
- Ongoing facility, reviewed every 12 months
- Security
- Often unsecured up to $150,000 for ABNs trading 12 months or more. A director's guarantee is standard.
- Time to funding
- 1 to 3 business days to set the limit up. After that, drawdowns usually land the same day.
- Typical use
- Seasonal stock, payroll in a quiet month, bridging a 60-day invoice, an opportunity you cannot plan for
- What you'll need
- ABN, Australian photo ID, and 6 months of business bank statements
What it is
What is a business line of credit?
A business line of credit is a revolving limit rather than a lump sum. The lender approves a ceiling - say $60,000 - and you draw against it whenever you need cash. Interest is charged only on the balance you have drawn. Repay it and the limit is available again, without reapplying.
That structure suits a specific problem: money going out before money comes in. Seasonal stock, a slow-paying head contractor, wages in a quiet month. It is a poor fit for a large one-off purchase, because a term loan will price that cheaper. Most facilities carry a monthly fee whether you draw or not, so an unused line is not free - it is cheap insurance you should still price.
Worked example
Three months on a $60,000 limit
- A landscaping business sets up a $60,000 limit and draws nothing on day one.
- Month 1: draws $20,000 for plants and materials on a school job. Interest is charged on $20,000, not on $60,000.
- Month 2: draws another $10,000 for a hire truck and casual labour. The drawn balance is $30,000, so interest is charged on $30,000. The remaining $30,000 of the limit costs no interest at all.
- Month 3: the school pays at the start of the month. The business repays $25,000, leaving $5,000 drawn, and interest for that month is charged on $5,000.
- At an indicative 1.5% a month on the drawn balance, those three months cost about $300, then $450, then $75 - roughly $825 in total, plus the monthly facility fee. On a $60,000 limit that fee is about $60 a month, so add roughly $180 across the three months.
The same $30,000 borrowed as a 12-month term loan would have accrued interest on the full amount for the full year, whether the school had paid or not.
Is this right for you?
Is a business line of credit right for you?
Good fit if…
- Your cash gaps are real but you cannot say in advance how big or when.
- You invoice on 30 or 60 day terms and get paid later than that.
- You buy stock seasonally and sell it down over the following quarter.
- You have been trading 12 months or more with steady deposits in your account.
- You will repay drawings as the cash comes in, rather than letting the balance sit at the limit.
Probably not if…
- You know exactly what you need and when. A term loan will price that cheaper.
- You would sit at the limit permanently. At that point you are paying revolving pricing for term debt.
- You have been trading less than 12 months. Most line-of-credit lenders will not look at you yet.
- You are buying an asset. Equipment or vehicle finance uses the asset as security and costs less.
- A monthly fee on an unused facility would annoy you more than the flexibility is worth.
What it costs
What a business line of credit costs
A line of credit has more moving parts than a term loan. Price all of them, not just the rate.
- Interest rate
- Our panel prices business finance between 6% and 20% p.a. On a line of credit it is charged on the drawn balance only, and it is often quoted per month rather than per year - multiply it out before you compare.
- Establishment fee
- Charged once when the limit is set up. Some lenders also charge a fee on each drawdown, commonly around 1.5% of the amount drawn. Establishment runs 1% to 2% of the approved limit, and where a drawdown fee applies it is 1% to 1.5% of each draw.
- Ongoing fees
- A monthly facility fee is standard and is usually payable whether you draw or not. A few lenders also charge an unused line fee on the undrawn portion. It runs 0.05% to 0.15% of the approved limit a month - about $30 to $90 on a $60,000 limit - and an unused line fee, where one is charged, is around 0.5% a year on the undrawn portion.
- Paying it out early
- Repaying a drawn balance early is normally free and is exactly how the product is meant to be used. Closing the facility itself may attract a minimum term or an exit fee. Minimum terms across the panel are commonly 6 to 12 months, and closing inside that usually costs the facility fees still to run.
Bizzloans is a broker, not a lender. The lender that funds your deal pays us a commission, which we disclose to you. You pay us nothing to compare.
Eligibility
Who can apply
- A valid ABN
- Current Australian photo ID
- In business more than 6 months
- Monthly turnover above $6,000
- Bad credit considered
- Most line-of-credit lenders want 12 months of trading, not 6
Don’t meet these? Call us — we have lenders for most situations, and we’ll tell you straight if we don’t.
Book a callWhat you'll need
What you’ll need
No documents
To get a quote
- Nothing. Tell us the limit you want and roughly what your monthly turnover looks like.
- No credit file is pulled to compare, so looking does not mark your file.
Once you pick a lender
To settle
- 6 months of business bank statements, as PDFs or a read-only bank feed
- Your ABN and a current Australian photo ID for each director
- An aged receivables report, if you invoice on terms
- Your most recent BAS, if the lender asks for it
- The facility agreement, director's guarantee and direct debit authority
How it works
How it works
5 minutes
Set the limit, not the loan
Tell us the ceiling you want available and what the gaps usually look like. Asking for more than you can service does not help - the assessment is the same as a term loan.
Usually the same day
We match you to a revolving lender
Fewer lenders write genuine revolving facilities than write term loans, and their trading-history rules are stricter. We go to the ones whose rules you fit.
1 to 3 business days to set up
Facility live, draw when you need it
Once the facility is open you request a drawdown online and the money moves to your business account, usually the same day. Repay and the limit refills.
This vs the alternative
Line of credit vs unsecured term loan
Same lenders, same guarantees, completely different cost profile. The question is whether you can name the amount today.
| Business line of credit | Unsecured term loan | |
|---|---|---|
| How you get the money | A limit you draw from as needed | One lump sum on settlement day |
| What you pay interest on | Only the drawn balance | The full amount, from day one |
| Cost when you are not using it | The monthly facility fee only | Full repayments continue regardless |
| Re-usable | Yes, up to the limit, without reapplying | No. Repay it and apply again. |
| Trading history usually required | 12 months | 6 months |
| Best for | Unpredictable, repeating cash gaps | A single named purchase or bill |
Running both is common and often sensible - a term loan for the fit-out, a line for the gaps. Just make sure the combined weekly outgoing still works on a slow month.
Three habits that keep a line of credit cheap
- Draw late and repay early. Interest accrues on the days the balance is out, so a drawdown timed to the supplier's due date costs less than one taken a fortnight ahead.
- Sweep it. When a big invoice lands, push it straight at the drawn balance instead of letting it sit in your trading account.
- Review the limit every 12 months. If your turnover has grown, the limit should be renegotiated rather than topped up with a second facility on worse terms.
FAQ
Business Line of Credit questions
How is this different from a business overdraft?
Do I pay anything if I never draw on it?
How quickly do drawdowns hit my account?
Can the lender reduce or cancel my limit?
Is a line of credit secured?
Can I use it to pay the ATO?
What happens if I sit at the limit for months?
Do I need to be trading 12 months?
How is interest calculated?
A person reads this, not a scoring engine
A named advisor takes your file to the lenders on the panel that fund your industry and your turnover — and tells you plainly when a business line of credit is the wrong answer and what to use instead.
Ready when you are
Compare Business Line of Credit today
Comparing is free, you’re never locked in, and checking won’t affect your credit score. If we can’t help, we’ll tell you that too.
