Small Business Line Of Credit.

Business Lines Of Credit and credit cards both allow for revolving access to credit, but a Business Line Of Credit usually has higher limits and lower interest rates, while credit cards often offer perks, like rewards points, cash back, or low-to-no interest introductory rates. Both report to the credit bureaus, and a utilization rate above 30% on either will hurt your credit score.

Business credit cards are good for everyday expenses, like office supplies and utility bills. Business Lines Of Credit are good for larger business needs, such as managing fluctuating revenue during seasonal dips, bridging the gaps in cash flow while waiting for client payments, or taking advantage of opportunities that increase the profitability of your business.

Yes. This is something most business owners don't realize until it's too late. Because a Line Of Credit is reported to credit bureaus the same way credit cards do, if your utilization creeps above 30%, your credit score takes a hit — even if you're making every payment on time.

Unlike a term loan where your balance only goes down, a LOC balance can fluctuate — which means your credit profile can too. If you're planning to apply for other financing down the road, a maxed-out line of credit can work against you.

Treat it like a safety net, not a lifeline. Use it for short-term, profit-generating expenses or true emergencies—not everyday bills. Borrow only what you need, pay it down quickly, and keep utilization under 30%. The businesses that get in trouble with Lines Of Credit are the ones that treat them like a checking account and end up overextending themselves.

Yes. Depending on the lender, there can be several. Some charge monthly or annual maintenance fees just to keep the account open, plus origination fees when you first set up the line. Most lenders charge draw fees every time you pull funds, and of course there are late payment fees if you miss a payment or pay after its due date. Some lenders even charge inactivity fees if you don't use your Line Of Credit.

Make sure you understand the terms and conditions of your line of credit agreement, especially when it comes to the fee schedule and repayment requirements.

While interest is only charged on the outstanding balance, rather than the entire credit limit, most lines of credit have a variable rate based on the national prime rate plus a margin set by the lender. That means your payments can go up or down depending on market conditions, even if your balance stays the same.

A Line of Credit works best for businesses with strong credit, steady revenue, and the discipline to use it strategically. For emergencies, it's a great tool for any business to have. If your business has recurring short-term needs or needs flexibility to act quickly on growth opportunities, a Business Line Of Credit can be a great fit.

But if you're looking for a set amount of capital for a specific purchase, or if you prefer having fixed, predictable payments, or your business is already stretched thin financially, a Line Of Credit is not the best option. Not sure? Take a look at our Use Case Analysis or you can schedule a funding consultation to review your specific situation and what makes the most sense for your business.