A business line of credit is a revolving credit account you draw from as needed and repay on a rolling basis. It's most commonly used for working capital, inventory, payroll gaps, and short-term cash flow needs — not one-time large purchases.
A business line of credit gives you access to a set amount of capital that you can draw from, repay, and draw from again — similar to a credit card but typically at lower rates and higher limits. You only pay interest on what you actually borrow, not the full credit limit.
A term loan delivers a lump sum upfront, repaid in fixed installments over a set period. A line of credit is flexible — you draw what you need, when you need it, and your available credit replenishes as you pay down the balance. Term loans fit one-time large investments; lines of credit fit recurring or cyclical cash flow needs.
The SBA's CAPLines program offers revolving and non-revolving lines of credit designed for small business working capital needs, with limits up to $5 million. The four types — Working, Seasonal, Contract, and Builders CAPLine — are each structured around a specific cash flow pattern.
Approval and credit limit depend on your business's cash flow, revenue consistency, time in business, and credit profile. A line tied to your accounts receivable or inventory — an asset-based line — may be available to businesses that don't qualify on cash flow alone.