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Business Line of Credit Options Up to $2m

  • Find your best rates from top Australian lenders
  • Only pay for what you actually use
  • Rates from 14.35% APR

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Business Line of Credit with Money Matchmaker

Just some of the 50+ business lenders we compare

Why compare business lines of credit with Money

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Save time

By comparing multiple line of credit options at once

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Get personalised rates

Ones you’re actually eligible for

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No credit score impact

Even when comparing lots of options

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Get expert support

From application through to line of credit set up

What is a business line of credit?

A business line of credit offers quick access to credit up to a specified limit whenever a business needs it. Unlike a business loan, you only pay interest on the amount you use, not the entire credit limit.

A business line of credit 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 are interested in a line of credit, particularly during uncertain economic times when businesses may be reluctant to commit to a fully-funded term loan.

What you get with a business line of credit:

  • Fast, ongoing access to capital for your business
  • Credit limits from $2,000 - $2 million
  • Only borrow as much as you need
  • Interest rates starting from 14.35% p.a.
  • Interest only charged on amounts drawn down (similar to a business overdraft)
  • More flexible than a business loan
  • Some lenders don’t require security
  • Set-up and ongoing fees apply

Borrowing for day-to-day working capital is the second most common reason (after purchasing a vehicle) that businesses take out business finance, accounting for 29% of all finance requests received by Money. The average finance amount is just over $75,500.

How a business line of credit works

Business line of credit

When is a business line of credit useful?

A line of credit is particularly useful for businesses whose cash flow is irregular.

According to Money borrowing data, the industries that most commonly request this kind of finance are building/construction, retail and hospitality – all of which can have and seasonal and unpredictable revenue.

Most businesses that take out a business 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 generally 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 business 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.

Andrew Beckett

Andrew Beckett, Head of Broker and Third Party Distribution, Lend

"With a line of credit, you could draw down $100k today on a $100k line of credit. Then let's say you get paid by one of your clients in a week’s time, you could clear that line of credit and you've only paid interest for that small amount of time."

Andrew Beckett, Head of Broker and Third Party Distribution, Lend

Business line of credit example

Let's say a business has been trading for two years and is looking to grow. 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

Best business line of credit interest rates

Business line of credit interest rates vary from lender to lender, but generally start from around 14.00% 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 and in what industry

“Often lines of credit are for better quality businesses and borrowers,” explains Commercial Finance Broker, Andrew Beckett.

“So the rates you get are often cheaper, if not very comparable with the best rates that term loans would offer. The main driver of the actual rate is the borrower risk profile, and what they need the money for."

Business line of credit fees

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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.

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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.

Line of credit vs business loan vs credit card

Amount

Business line of credit

$5,000 - $2 million

Business loan

Up to $1 million

Business credit card

Up to $100,000

Term

Business line of credit

Ongoing

Business loan

1 month - 5 years

Business credit card

Ongoing

Interest charged

Business line of credit

On amount drawn down

Business loan

On remaining balance

Business credit card

On balance owing after interest-free period

Fees

Business line of credit

Upfront and ongoing

Business loan

Upfront and ongoing

Business credit card

Upfront and ongoing

Security

Business line of credit

Secured or unsecured

Business loan

Secured or unsecured

Business credit card

Almost always unsecured

Rewards

Business line of credit

No

Business loan

No

Business credit card

Yes

Business line of creditBusiness loanBusiness credit card

Amount

$5,000 - $2 million

Up to $1 million

Up to $100,000

Term

Ongoing

1 month - 5 years

Ongoing

Interest charged

On amount drawn down

On remaining balance

On balance owing after interest-free period

Fees

Upfront and ongoing

Upfront and ongoing

Upfront and ongoing

Security

Secured or unsecured

Secured or unsecured

Almost always unsecured

Rewards

No

No

Yes

How to compare lines of credit for business in 6 steps

Here are the key factors to consider when comparing business line of credit options.

1

The interest rate you’ll be paying

2

The fees that will apply (upfront and ongoing)

3

The duration of the credit line (if applicable)

4

The repayment schedule and whether it works for your cashflow situation

5

The application process (and how easy it would be to extend your line of credit if needed)

6

Your eligibility (which lenders are you compatible with)

It’s common for borrowers to choose a lender that offers a ‘patchwork’ of finance products to suit various needs. For example, a business might need an asset loan to finance a vehicle purchase, supplemented with a line of credit to cover ongoing costs. However, you can often get a better deal by using a separate specialist lender for each separate product.

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 6-12 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:

1

Proof of identity

2

Proof of ABN and GST registration

3

Business bank statements

4

Trust Deed if the business is held in a trust

5

Tax returns

6

Financial records including profit and loss statements and your balance sheet (provided by your accountant)

7

A business plan stating how you will use the funds

Ready to compare business lines of credit?

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More business finance options

The type of finance that will suit best depends on your business, what it needs funds for and how soon.

FAQs about business lines of credit

Some businesses may qualify for an ongoing business line of credit with no specified term duration, but with non-bank lenders there is often a maximum term during which the borrower must repay the credit line in full, The max term is commonly two or three years.

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.

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 could mean a lower interest rate on any withdrawn funds by securing the line of credit with an asset, such as residential or commercial property.

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.

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 14.00% - 25.00% p.a., while an unsecured line of credit may attract rates between 17.50% - 30.00% p.a.

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.

Depending on the lender, business lines of credit can generally extend to a maximum limit of between $100,00 up to $2 million.

Yes, a business line of credit involves making a credit application so generally would appear on your credit report.

The main costs of borrowing with a business line of credit are interest charged (on the amount drawn down only) and fees charged by the lender when you apply, and/or a regular line fee.

If your business line of credit has a fixed duration, you’ll either need to repay the full balance by the end date and close the account or negotiate with the lender to extend the line of credit for a new term. An extension could either be on the same terms as the original terms, or different ones if the lender is willing to make adjustments.

Shaun McGowan is the founder of Money.com.au. He's determined to help people and businesses pay as little as possible for financial products, through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.

Sean Callery is the Editor of Money.com.au. He has over 15 years of international experience. He is qualified with a Certificate IV in Finance and Mortgage Broking (FNS40821) and is compliant to provide general advice in Tier 1 General Insurance (RG 146) products.

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