A Line of Credit can be compared to a small business loan, however, a lump sum or limit is approved and the business owner draws only what is needed.  Interest is only accrued on the funds that are used. The Line of Credit is revolving, so business owners may continue to draw funds as they are paid back to the lender. Business owners use Lines of Credit to make up for shortfalls in their revenue, to pay salaries, buy goods or services, to meet payroll needs or for expansion.  The Line of Credit may have monthly or weekly payments which will depend on the lender used and the initial term.

A Line of Credit may have a fixed rate or a variable rate, dependent upon the lender. The amount approved on the Line of Credit as well as the interest rate is directly related to the monthly revenue of the business, the industry and the credit worthiness of the borrower. A great benefit of a Line of Credit is you only accrue interest and make payments on the amount of the line that is outstanding. Many Line of Credit lenders will continue to increase the limit on the line as the business borrows and pay the funds back as scheduled. If your business is approved for a line of credit.  You should use it and pay it back as soon as convenient.  If a line is opened and unused in 45 days it can possibly be closed by the lender.  Lenders will continue to raise the limit as the funds are used and paid back regularly.  This is very good way to build the credit of the business.