Line of Credit

A business line of credit allows you to borrow up to a specific limit and only pay interest on the money you borrow — similar to a credit card. When you repay the money you borrow, your credit line is replenished. Business lines of credit can be used for a variety of short-term needs, including paying for operational expenses, purchasing new equipment or upgrades, jump-starting growth initiatives, and covering cash flow gaps.

Any business that has regular, short-term expenses they need to or would like to float in order to smooth cash flow gaps would be fit for a line of credit.

A business line of credit is intended for large draws that may be paid back over several months. While you will pay interest on the entire draw amount, the cost may be lower than a business credit card. In contrast, a credit card is designed for day-to-day expenditures and typically requires a minimum monthly payment while your balance revolves. A business credit card often has other fees attached as well.