How does a business line of credit work?

The revolving structure

A line of credit gives you a credit limit — say $100,000 — that you can draw against in any amount up to the maximum, as often as you want. You repay what you've drawn, and the repaid amount becomes available to draw again. That's the 'revolving' part: the facility renews itself as you use and repay it, with no new application required for each draw.

Mechanics of a typical draw cycle

1. Approval. Lender approves you for a maximum credit limit (e.g., $100,000) based on revenue, time in business, and credit profile.
2. Draw. You request $20,000. Funds typically arrive in your business bank account within 1-2 business days.
3. Interest accrues. Interest accrues only on the $20,000 outstanding — not the full $100,000 limit. Most non-bank lines use simple-interest daily accrual; bank lines may use 30/360 or actual/365.
4. Repayment. You make monthly payments (interest + some principal) over a defined draw-payback period (typically 6-18 months at non-bank lenders). The business line of credit calculator shows the monthly payment and total interest at your draw amount and APR.
5. Capacity restores. As you repay principal, the credit becomes available to draw again. Repay the full $20K and your $100K capacity is fully restored.

Bank lines vs. non-bank fintech lines

Two distinct tiers with meaningfully different terms:

• Bank lines — 8-16% APR variable, $50K-$500K typical limit, 2-6 week underwriting, 12-month revolving period with annual renewal, often require 680+ FICO + 2+ years in business + DSCR analysis. Variable rates anchored to the prime rate published in the Federal Reserve H.15 release (Prime + 1-7%).
• Non-bank fintech lines — 18-35% APR (sometimes higher), $10K-$250K typical limit, 1-7 business day approval-to-fund, 6-18 month draw-payback periods, accept 600+ FICO + 1+ year in business + $15K+/month deposits. Pricing less tied to Prime, more tied to risk tier.
• SBA-backed lines — SBA Express (capped at $500K, revolving up to 7 years) and SBA CAPLines (four specialized line structures) offer government-guaranteed alternatives at bank-tier pricing. Details at sba.gov/funding-programs/loans/7a-loans.

See our full comparison of the best business lines of credit in 2026 for specific bank and non-bank issuers, current rates, and credit-limit ranges.

Variable rate vs. fixed rate

Most bank lines are variable rate — your interest rate moves with the Federal Reserve prime rate plus a spread. When Prime increases (or decreases), your APR follows. Non-bank fintech lines can be variable OR fixed — fixed is more common at the non-bank tier because the shorter draw-payback periods make rate volatility less impactful. Always confirm: variable lines that look cheap today can cost meaningfully more if Prime rises during your draw period.

Fees that compound the headline rate

Three fee categories that change your effective cost meaningfully:

• Draw fee — 1-3% per draw at many non-bank lenders. Compounds quickly if you draw frequently in small amounts.
• Maintenance / unused-capacity fee — annual or monthly fee on the undrawn portion. Bank lines typically 0.25-0.5% annually on unused capacity.
• Origination fee — one-time, 0.5-3% of the credit limit, typically deducted at funding.

Reset, renewal, and termination terms

Most lines have an annual review where the lender can reduce or freeze the line based on revenue, financial covenants, or general credit conditions. Bank lines often include explicit covenants (DSCR maintenance, max-total-debt thresholds); breach triggers a freeze. Non-bank lines usually have unilateral termination rights — the lender can close the line at any time with notice. Read the renewal + termination clauses before signing.

How to apply

Apply at Find my match — your file routes to the funding partners best matched to it. See how to apply for a business line of credit for the document checklist + step-by-step application guide.