Business line of credit options up to $2M
Find your best rate from over 60 lenders in 60 seconds.
Our Promises
$200 Best Match Guarantee
100% Australian Customer Support
30+ Australian Lenders To Choose From
No Credit Score Impact
Shopping around for the right loan can save you thousands of dollars in interest and fees.
In our business line of credit guide:
1
3
5
7
2
4
6
8
1
2
3
4
5
6
7
8
What is a business line of credit?
A business line of credit is a flexible financing option that allows you to access a predetermined amount of funds whenever you need them, up to a specified limit. Unlike a business loan, you only pay interest on the amount you borrow, not the entire credit limit.
This can be a great option for businesses that have irregular cash flows or want to be prepared for unexpected expenses.
With a revolving line of credit, you can borrow, repay, and borrow again without having to reapply each time. In that sense, it works similarly to a business credit card or a charge card.
This flexibility is one of the main reasons businesses I speak with are interested in a line of credit.
What you get with a business line of credit
- Fast, ongoing access to capital for your business
- Credit limits from $5,000 - $2 million
- Only borrow as much as you need
- Interest only charged on amounts drawn down
- More flexible than a business loan
- Some lenders don’t require security
- Interest can be fixed or variable
- Set-up and ongoing fees apply
When is a business line of credit useful?
A line of credit is particularly useful for businesses whose cash flow is irregular.
Most of the businesses we help with a line of credit use it to cover regular expenses like wages, paying invoices and buying stock.
It’s also often used as a backup source of finance to cover unexpected expenses.
A line of credit is not as suitable for large, longer-term investments like financing a business vehicle or other kinds of business assets.
How to use a business line of credit?
Unlike a loan, when you withdraw funds using your line of credit, you’ll pay interest only on the amount you’ve withdrawn, not the credit limit amount.
This can reduce the amount of interest your business will pay over time with a business line of credit.
You can withdraw the remaining amount up to the agreed limit at any time, including any funds you have already repaid.
How a business line of credit works
| Line of Credit | Amount withdrawn | Amount accruing interest | Remaining credit |
|---|---|---|---|
$100,000 | $20,000 | $20,000 | $80,000 |
$100,000 | $100,000 | $100,000 | $0 |
Business line of credit case study
"Let's say a business has been trading for two years and is looking to grow", explains Money.com.au's Head of Sales, Arthur Peios.
"They're looking at redoing their website and doing some sign writing on their building. The total cost is going to come to around $50,000."
"The advantage of having a business line of credit is you don't have to borrow all the money at once."
"Say the sign-writing quote comes in at $5,000. You can take that $5,000 out of your line of credit and the provider will only charge you interest on what you've used. Once you pay that $5,000 back, the credit line reverts to the original limit."
"Then two months down the track, the business decides to redo the website and some other bits and pieces. It can access the funds again through the line of credit without needing to reapply, and then repeat the process as often as needed. So the line of credit acts as a flexible credit facility for whatever the business needs."
Secured vs unsecured business line of credit: Which is best?
Secured line of credit
- Usually comes with a lower interest rate
- Can be secured by residential or commercial property, or a business asset
- You won’t be able to sell the asset used as security while the line of credit is open
Unsecured line of credit which
- Usually has a higher interest rate
- More straightforward (and faster) to access
- Like an unsecured business loan, you’re not tying up personal or business assets to act as collateral
Business line of credit fees
If you set up a line of credit for your business, there are generally upfront and ongoing fees.
Business line of credit application fee
Some (in fact, most) lenders charge a one-off application fee when you set up the line of credit. This is usually based on a percentage of the approved credit limit.
For example, you may need to pay 0.50% to 2% of your approved credit limit, as illustrated below.
Best business line of credit interest rates
Business line of credit interest rates vary but generally start from around 7% p.a.
Here’s what the lender will consider when deciding what interest rate to charge:
- Whether the line of credit is secured or unsecured
- The types of assets used as security (a residential property or commercial property)
- Your business and personal credit score
- How long your business has been operating
Business line of credit fees
If you set up a line of credit for your business, there are generally upfront and ongoing fees.
Business line of credit application fee
Some (in fact, most) lenders charge a one-off application fee when you set up the line of credit. This is usually based on a percentage of the approved credit limit.
For example, you may need to pay 0.50% to 2% of your approved credit limit.
Line fees
A business line of credit also often involves a line fee. This is the ongoing fee you pay the lender to keep your credit line open so you can always access finance when it’s needed.
Again, this is often a percentage of the credit limit, but some lenders charge a flat line fee per month or quarter.
As you’ll see below, even a small difference in the line fee percentage in particular can have a big impact on how much you’ll end up paying.
Business line of credit fee examples
| Line of credit amount | Application fee | Monthly line fee (%) |
|---|---|---|
$50,000 | 2.00% = $1,000 | 1.00% = $500 |
$200,000 | 1.00% = $2,000 | 0.50% = $1,000 |
Who is eligible for a business line of credit?
Here’s what’s generally required to be eligible for a business line of credit:
- You own a business with an ABN and is GST-registered
- You’re an Australian citizen or permanent resident
- The business has been operating for at least six months
- You can provide business bank statements
- Monthly business revenue is above lender’s cut off
- Your credit score is above the lender’s cut off
How to apply for a business line of credit
You can apply for a small business line of credit with banks or specialist online lenders. Specialist lenders are known for providing fast approval. In fact, you can apply online and often be approved the same day.
To apply for a line of credit, you’ll need to provide a lender with sufficient business and personal documentation to prove your eligibility and ability to repay any funds you borrow. This could include:
- Proof of identity
- Proof of ABN and GST registration
- Business bank statements
- Trust Deed if the business is held in a trust
- Tax returns
- Financial records including profit and loss statements and your balance sheet (provided by your accountant)
- A business plan stating how you will use the funds
Business Line of Credit Vs Business Loan Vs Business Credit Card
| Business line of credit | Business loan | Business credit card | |
|---|---|---|---|
Amount | $5,000 - $500,000 | Up to $1 million | Up to $80,000 |
Term | Ongoing | 1 month - 5 years | Ongoing |
Interest charged | On amount drawn down | On remaining balance | On balance owing after interest-free period |
Fees | Up front and ongoing | Up front and ongoing | Up front and ongoing |
Security | Secured or unsecured | Secured or unsecured | Unsecured |
Rewards | No | No | Yes |
Ready to compare business line of credit options?
Get your best offers from multiple lenders. There's no obligation and checking your rates won't impact your credit score.
GET STARTEDGET STARTEDShopping around for the right loan can save you thousands of dollars in interest and fees.
Business Loan guides and resources
Learn more about your business finance options and how to get the funding you need to grow your business.
Hear from people who found the right loan
AS FEATURED IN
Popular questions about business lines of credit
Get help from a real-life Money Matchmaker® from start to finish.
What terms are available for a business line of credit?
The general term for a business line of credit is between 3 - 36 months. However, depending on your lender, you may have access to a revolving line of credit, without a maximum term. If you access a revolving line of credit, your lender will review the agreement at fixed intervals such as every one or two years.
Can you get a line of credit for a small business?
Yes, small businesses are eligible to apply for a business line of credit with most providers, provided they meet the other criteria. For example, the business may need to have been in business for more than six months and its monthly revenue may need to be above a certain cut off. Lenders usually also check the business credit score when assessing whether to lend to it.
How is a business line of credit different to an overdraft?
A line of credit is similar to a business overdraft in that it allows you to borrow funds as you need them, up to a set limit. However, a business overdraft is available through a transaction account, whereas a line of credit is standalone business finance.
For this reason, a business line of credit generally offers greater flexibility as you can shop around for the best product and rate without needing to change your transaction account provider as well.
Will I need to put down a deposit for a business line of credit?
No, you won’t need to put down a deposit on a business line of credit. You can, however, apply for a secured line of credit, which will provide a lower interest rate on any withdrawn funds by securitising the line of credit with an asset, such as property.
Can I use a business line of credit to replace existing business assets?
Yes, you can use a business line of credit for any legitimate business purpose. This includes purchasing new assets for your business, or replacing any existing assets. However, there may be lower interest rates available on secured asset finance options, like a chattel mortgage.
What is the typical interest rate I can expect to pay on a business line of credit?
The typical interest rate you can expect to pay on a business line of credit will be different for a secured or unsecured business line of credit. On a secured line of credit, interest rates will generally start from between 7% - 10%, while an unsecured line of credit may attract rates between 15% - 25%.
How soon can I be approved?
If you apply through non-bank lenders, it’s highly likely you can get a decision on the same day. Non-bank lenders will offer faster approval on applications up to $150,000 — in this instance, they may only require business bank statements to grant approval on a line of credit.
Written by
Loans Expert
Shaun McGowan
Reviewed by
Editor
Sean Callery
