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Business loansLast updated: 27 Oct 2026
Get a business line of credit
A line of credit gives your business flexible access to funds up to an agreed limit, and you only pay interest on what you draw.
Why get a line of credit with Capitalise
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What is a business line of credit?
A line of credit is a flexible type of business finance that lets you borrow up to an agreed limit whenever you need to. Unlike a business loan, which pays out one lump sum, a line of credit stays open, so you can use it, repay it and use it again. It's one of the three main types of business credit line, alongside business overdrafts and revolving credit facilities.
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How does a line of credit work?
A line of credit acts as a safety net for tight cash flow or unexpected costs.
The lender reviews the facility at the end of the agreed term and, if you've kept up your repayments, may renew it, sometimes with a higher limit.
What can you use a line of credit for?
Cover bills while you wait to be paid
Keep payroll, rent and supplier bills on track while customer payments come in. Once your invoices are paid, you can clear the balance and use the funds again.
Buy stock ahead of busy periods
Stock up before a peak season without draining your cash reserves. You then repay the balance as sales come in.
Act fast on urgent costs and opportunities
Pay for urgent repairs or take up a time sensitive deal, such as a supplier discount, without applying for a new loan. The funds are ready when you need them.
Smooth out quieter months
Draw on your limit to cover running costs when trade slows down in a seasonal business. You only pay interest for the months you actually use it.
How much does a line of credit cost?
The cost of a line of credit depends on the lender, your limit, your credit profile and how much of the limit you actually use.
How are interest charges worked out on a line of credit?
Interest on a line of credit is only charged on the amount you've drawn, not on your full limit, and is usually calculated daily. Repayments are typically monthly and cover the interest plus part of the balance, so the sooner you repay, the less you pay.
Cost | What to expect |
|---|---|
Interest | Your rate is set by the lender based on your business's risk profile, and is often variable. |
Arrangement fee | A one off fee for setting up your limit, often a percentage of the limit. The amount varies by lender. |
Non utilisation fee | Some lenders charge a small fee on the part of your limit you don't use, so check for this before you accept an offer. |
As an example, drawing £10,000 from a £50,000 limit at an example rate of 18% a year for 30 days would cost around £148 in interest. Drawing the full £50,000 for the same period would cost around £740. Limits usually start from around £5,000 and can reach £500,000 or more for established businesses. Secured lines, backed by business assets or property, tend to come with higher limits and lower rates.
What are the advantages and disadvantages of a line of credit?
Advantages
Disadvantages
How is a line of credit different from a business loan or an overdraft?
The main difference between the 3 types is how you access the money. A line of credit gives you ongoing access to funds up to a limit, a business loan pays out one lump sum upfront, and an overdraft lets your business bank account go below zero.
Line of credit | Business loan | Business overdraft | |
|---|---|---|---|
How you receive funds | Draw what you need into your bank account | One lump sum upfront | Spend below zero in your current account |
Interest charged on | Only the amount you've drawn | The full loan amount from day one | Only the overdrawn balance |
Repayments | Flexible, with a minimum monthly payment | Fixed instalments over an agreed term | Usually no set repayment schedule |
Best for | Cash flow gaps and costs you can't predict | Planned purchases with a known cost | Small, short dips in your account balance |
For a closer look at costs and when each one makes sense, read our guide to a business line of credit vs a term loan.
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How do you get a line of credit?
To get a line of credit, lenders want to see financial stability and a track record of revenue. Having these ready can help your application move faster.
Some lenders will also ask directors for a personal guarantee, particularly for unsecured facilities.
Are there different types of business lines of credit?
There are two main types of business line of credit: revolving and non revolving. The difference is whether you can borrow the money again once you've repaid it.
Revolving line of credit
A flexible cash reserve you can keep dipping into, much like a business overdraft. As you repay, the funds become available to use again for day to day costs and surprises.
Non revolving line of credit
A set amount for a specific purpose, such as buying equipment or funding a project. Once you've repaid it, you can't borrow from it again under the same terms.
What other business finance options are available?
How to apply for a line of credit
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Apply with Capitalise
Tell us about your business, how much you'd like to access and what you'll use it for.
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Gather your documents
Your dedicated funding specialist helps you gather your documents, puts your application together and sends it to suitable lenders from our panel of 130+.
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Receive your funding
Compare your offers with your specialist's support. Once you accept, your line of credit can be set up in as little as 48 hours.
Apply for a line of credit with Capitalise
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Frequently asked questions
Page last reviewed on by Nick Richardson