Revolving credit you draw against as needed, repay, and draw again. Cheaper than an MCA for established businesses; the right structure when capital needs are recurring or unpredictable.
A business line of credit is a revolving facility — like a credit card with a higher limit and (usually) lower rates. You're approved up to a maximum, you draw from it as needed, you pay interest only on the outstanding balance, and as you repay you free the credit back up to draw again.
Lines come in two main flavors: bank lines (cheaper, slower, stricter) and non-bank or broker-network lines (faster, more flexible qualification, but with materially higher pricing). Both have their place.
The honest framing: a non-bank line at 30% APR is more expensive than a 9% bank line, but it's still cheaper than a 60%-APR MCA — and you only pay for what you draw. If you have an approved $50,000 line and only draw $10,000 for two months, you're paying interest on $10,000 for two months, not on $50,000 for a year.
That structural difference is what makes the line of credit the most efficient product for businesses with recurring or unpredictable working-capital needs. The cost is honest and proportional to use. The trade is qualification — banks generally want 12+ months in business, $15k+/month in deposits, and 600+ FICO; non-bank lines are looser on credit but tighter on revenue.
Bank lines: lower rates (often 7–15% APR), larger limits ($50k–$500k), longer terms (often renewable annually), but slower (2–6 week underwriting) and stricter qualification.
Non-bank / fintech lines (online lenders + broker-network lines): faster (1–7 business day funding), looser credit requirements, but pricing in the 15–60% APR range and limits typically capped at $100k–$250k.
A line of credit wins when your capital need is recurring or unpredictable. If you know you'll need capital, you're just not sure when or how much, a line costs you nothing until you draw. A term loan is wrong because you'd be paying interest on cash you haven't deployed. An MCA is wrong because you'd be paying for capital you don't yet need at a much higher all-in cost.
A line is also the right structural answer for cash-flow smoothing — a business that's profitable on the year but cash-tight in two months out of twelve. The line covers the gap, gets repaid in the strong months, and stays available for next year.
Three things to confirm before signing: the draw fee per transaction (some lines charge a 1–3% fee on every draw, which compounds with frequent use), the maintenance fee (annual or monthly fees on undrawn capacity), and the reset/renewal terms (can the lender unilaterally reduce or close your line, and under what conditions). The line that looks cheapest on day one isn't always cheapest after a year of normal use.
As of Q2 2026, the Federal Reserve prime rate sits in the 7.50–8.50% band depending on the Fed's most recent move. Most bank-tier lines of credit price as Prime + 1–4% — putting a strong-file bank line in the 9–13% APR range right now. Non-bank fintech lines, less tied to Prime, continue to price in the 18–35% range for typical sub-bank-tier files. The gap is wide enough that working through a brokerage to test bank-tier eligibility before defaulting to a fintech line frequently saves 10+ APR points on the same approved amount.
Both are revolving facilities, but lines of credit usually offer higher limits, lower APRs, and direct cash transfers to your business bank account (vs. card-based purchases). Cards are better for everyday expenses; lines are better for working capital and larger, ad-hoc draws.
Most non-bank lines start at 600+ owner FICO with 12+ months in business and $15k+ monthly deposits. Bank lines typically require 680+ FICO, two years in business, and stronger financial reporting (P&L, balance sheet, often tax returns).
Non-bank / fintech lines often issue an approval in 24–48 hours and fund first draws in 1–7 business days. Bank lines typically take 2–6 weeks from application to approval and another few business days to fund a draw.
Just what you draw. If you have a $100,000 line and draw $20,000, you accrue interest only on the $20,000 outstanding. Some lines also charge a small annual maintenance fee on the undrawn portion — confirm this before signing.
Yes — most line agreements allow the lender to reduce or close the line under specified conditions (covenant breach, deteriorating financials, or in some agreements, at the lender's discretion). Read the renewal and termination clauses carefully.
For most established businesses with predictable revenue and 600+ credit, yes — a line is meaningfully cheaper and more flexible. An MCA wins on speed and on qualification flexibility (lower credit, shorter time in business, weaker financials).
Most non-bank lines require $15,000+ in monthly business deposits (trailing 3–6 months consistent). Bank lines typically require $25,000+ monthly deposits and a debt-service coverage ratio above 1.15x. SBA-backed CAPLines have no fixed minimum but use trailing cash-flow analysis to size the line.
Under 12 months in business is generally a hard no for traditional lines. Three paths exist for early-stage businesses: (1) a personal line of credit secured by the owner, (2) a secured business credit card that reports to business bureaus and helps build credit history toward a line in 12+ months, (3) revenue-based financing if there's documented monthly revenue. None are a substitute for a true line — they're bridge products.
Most non-bank lines run a hard personal credit pull at application — typical 5–10 point dip, recovering in 90 days. Most lines do NOT report ongoing balances to personal credit bureaus (only to business bureaus like D&B and Experian Business), so utilization doesn't affect your personal score. A default or charge-off would, though, since most lines require a personal guarantee.
Unsecured lines (most non-bank fintech lines) rely on cash flow + personal guarantee — no specific collateral pledged. Secured lines (most bank lines above $250K) are typically blanket-lien (UCC-1 filed on all business assets) or AR-secured (line capacity tied to outstanding receivables). Secured lines price 200–400 basis points cheaper but tie up your collateral capacity for any future financing.