What is a business line of credit?

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 38% of small employer firms applied for a loan, line of credit, or merchant cash advance in the prior 12 months — a competitive market with options across the credit spectrum. For a side-by-side look at specific bank and non-bank issuers, rates, and credit-limit ranges, see our full comparison of the best business lines of credit in 2026. If you're ready to apply, apply with ClearValue Lending — your file routes to the funding partners best matched to it.