What is a business line of credit?

A business line of credit is a revolving credit facility with a set limit. You draw what you need, repay it, and the availability resets — you only pay interest on the outstanding balance. It's designed for ongoing or unpredictable cash flow needs, not one-time capital deployments.

A business line of credit gives you a pre-approved credit limit — say $100,000 — that you draw from as needed. Unlike a term loan, which delivers a lump sum and closes when repaid, a line of credit revolves: pay down the balance and the availability returns. You pay interest only on what you've drawn, not the full limit.

Secured vs. unsecured lines

Secured lines — backed by collateral (accounts receivable, inventory, or a blanket lien). Typically higher limits and lower rates. A UCC-1 lien is filed against pledged assets.
Unsecured lines — no specific collateral pledged. Higher credit score and revenue requirements. Rates are generally higher than secured lines to compensate for lender risk.
Many bank lines for established businesses are unsecured up to $100,000–$250,000; larger facilities typically require collateral.

Revolving vs. non-revolving

Most business lines of credit are revolving — your availability is continuously restored as you repay. Some lenders offer non-revolving lines (also called draw facilities), where you can draw during a defined period but don't restore availability as you repay. Non-revolving lines behave more like term loans once the draw period closes. Know which structure you're being offered before you sign.

What lines of credit are designed for

Payroll smoothing — bridging slow receivables weeks when payroll falls due.
Seasonal inventory — buying stock before a peak season, repaying from sales proceeds.
Unexpected expenses — equipment repairs, emergency operating costs.
Accounts receivable gaps — covering operating costs while waiting for invoice payment.
Lines are less suited for capital expenditure or equipment purchase — term loans and SBA programs are better structured for those.

Qualification factors

2026 qualification thresholds vary by lender tier. Banks and credit unions typically require: 620–680+ personal FICO (660+ for larger unsecured lines), 12–24 months in business, and $10,000+ in monthly revenue. Alternative lenders often accept 580+ FICO and 6+ months in business at higher rates. The Federal Reserve's 2026 Report on Employer Firms found that lines of credit are the most commonly sought financing type among small employer firms — a competitive market with options across the credit spectrum. If you're ready to apply, apply with ClearValue Lending — your file routes to one matched lender partner.

Authoritative sources

Lines of credit were the most commonly sought financing product among small employer firms in the 2025 Small Business Credit Survey. — Federal Reserve 2026 Report on Employer Firms (2025 SBCS)
The SBA offers revolving lines of credit through the CAPLines program, including the Working Capital CAPLine, with a maximum amount of $5 million under the 7(a) umbrella. — SBA.gov — 7(a) Loans
The CFPB's small business lending rule requires data collection on applications for lines of credit, including whether the credit is secured or unsecured. — CFPB — Small Business Lending Rule

Key takeaways

A line of credit revolves — draw, repay, redraw up to your limit; interest accrues only on the outstanding balance.
Secured lines offer higher limits and lower rates; unsecured lines have easier setup but higher cost.
Lines are best for working capital, payroll smoothing, and seasonal needs — not one-time capital purchases.
The SBA CAPLines program provides government-backed revolving lines up to $5M for working capital needs.
Lines of credit are the most commonly sought small business financing product — the market is competitive.