Business Line of Credit: How to Get Approved and How to Use It

A business line of credit is one of the most flexible and useful financial tools a business owner can have. Unlike a term loan — which gives you a lump sum you repay on a fixed schedule — a line of credit is revolving. You draw from it when you need capital, repay it, and draw again. You only pay interest on what you use.

For businesses with variable cash flow, seasonal revenue, or recurring short-term capital needs, a line of credit is often more efficient than any other form of financing.

How a Business Line of Credit Works

Your lender approves you for a maximum credit limit — say, $250,000. That capital sits available for you to draw as needed. You might draw $50,000 in January to cover payroll during a slow month, repay it in February when a major client pays, and draw $75,000 in March to fund a new project.

You pay interest only on the outstanding balance. If you draw nothing, you pay nothing (outside of any maintenance fees the lender charges).

Lines of credit are typically revolving — meaning as you repay, your available balance restores. Some lenders issue non-revolving lines, which work more like a term loan once drawn.

Secured vs. Unsecured Lines of Credit

Unsecured lines of credit don't require collateral. They're approved based on your creditworthiness, revenue, and business health. Because the lender has no asset to claim if you default, rates are higher and credit limits are lower.

Secured lines of credit are backed by collateral — typically accounts receivable, inventory, or real estate. Because the lender has a claim on assets, they can offer higher limits and lower rates. A $1M+ revolving line is almost always secured. If you're weighing your options, our guide to secured vs. unsecured business credit lines breaks down which structure is right for your situation.

Qualification Requirements

Most lenders look for:

  • Credit score: 650+ for alternative lenders, 680+ for bank lenders
  • Time in business: 1+ year for alternative lenders, 2+ years for banks
  • Annual revenue: $150,000+ minimum, $500,000+ for larger lines
  • Cash flow: Positive monthly cash flow with manageable existing debt

For a full breakdown of what lenders expect, see business line of credit requirements for 2026. At Indymae, our lines of credit range from $25,000 to $750,000 and we work with businesses across the credit and revenue spectrum.

What Does a Line of Credit Cost?

Costs include:

  • Interest rate: 8–24% APR depending on creditworthiness
  • Draw fees: Some lenders charge 1–3% per draw
  • Maintenance fees: Some lenders charge monthly or annual fees
  • Origination fee: Typically 1–3% of the credit limit

When to Use a Line of Credit

The best uses for a business line of credit:

Cash flow gaps: Cover payroll, rent, or supplier payments when receivables are delayed.

Seasonal businesses: Retail, hospitality, and construction businesses often need capital during slow seasons.

Recurring operational costs: Marketing campaigns, inventory purchases, or project expenses that recur regularly.

Emergency buffer: Having available credit means you can respond to unexpected costs without disrupting operations.

To get the most value from your available credit, it helps to have a clear revolving credit strategy — particularly if you expect to draw and repay frequently throughout the year.

When NOT to Use a Line of Credit

Lines of credit are short-term tools. Using them for long-term investments — like purchasing equipment or real estate — is a mistake. A line of credit's rates are higher than term loans, and the revolving structure creates a temptation to stay permanently indebted.

For major capital expenditures, a term loan, SBA loan, or equipment financing is almost always a better fit.

How to Apply

Ready to get approved for a business line of credit? Indymae matches businesses with bank and non-bank lenders to find the right limit, rate, and structure for your needs. Apply online and receive a decision within 24–48 hours.