Revolving credit line - business credit line

How a Revolving Line of Credit Can Benefit Your Business


Running a business is a complex thing and sometimes business owners need financial assistance. A revolving line of credit is one of the many financing options available to small business owners to help with cash flow problems. Learn all about revolving credit, what it is, what it can do for your business and how to get it.

What is a revolving line of credit?

By definition, a revolving line of credit is an arrangement that allows a person or business to borrow money repeatedly up to a maximum credit limit set by the lender. This means that the borrower gets a lump sum and can take out of that sum at their discretion.

The revolving aspect of this loan works such that every payment towards the credit line, excluding fees and interest, raises the credit back up. Then you can draw funds again and again as long as you keep paying it back.

You don’t have to pay interest for the entire amount available as your credit limit. The lenders can only charge interest on the money you take out. Consistent payments reduce interest while increasing the available credit.

To get a credit line from a bank, a banking customer will request to have an overdraft plan linked to their checking account. Other names for a revolving credit line are operating line, bank line, or, simply, a revolver.


Revolving Lines of Credit Examples

Credit cards

A credit card allows an individual access revolving line of credit issued by a financial institution. A credit card holder pays for their expenses with the card directly, the loan is basically pre-approved. They do not take out the amount in lump cash.

The payments that can be made through the card have a stated credit limit. Money borrowed via credit card must be paid back at the end of each billing cycle. Interest is charged on a line of credit as soon as money is borrowed.

Personal line of credit

A personal line of credit gives a borrower access to funds that they can withdraw as needed. Unlike credit card loans that are solely connected to a plastic card’s personal credit lines funds can be accessed in different ways. You can get the funds via bank transfer, a check or a credit card connected to your bank account.

Personal lines of credit may operate on a revolving credit agreement or be a one-time thing.

Business Line of Credit

A business line of credit loan is a business financing option that allows borrowers to withdraw funds up to a credit limit. One great feature of a business line of credit is that interest is only charged on the amount drawn. This means that your business can have a potential credit of $500,000 on standby but you only pay interest on the amount you spend, even if it’s just $1000.

Business lines of credit allow your business to pay back a portion or all of the borrowed money and replenish your credit limit.  They can also help to increase or build your business credit score. 

Home equity line of credit (HELOC)

HELOC is a secured credit guaranteed by the borrower’s home as collateral. You can obtain a HELOC with an interest rate of under 5% if you have excellent credit ratings. This type of credit is essentially a second mortgage, with the account holder’s home serving as collateral.

How Does Revolving Credit Work

Most traditional loans options are loans tailored towards meeting specific business needs. Revolving credit can be applied to meet a wide range of business needs.

Application ease

You can borrow funds via revolving credit lines from a bank or online lender. The application process is fast and easy, it typically takes 1 to 2 days.

Credit flexibility

A credit line allows a borrower to request any amount of credit but ultimately it’s the lenders who make the final decision. The credit limit however represents funds available to the borrower. The borrower doesn’t have to use it all and the credit limit does not influence the interest rate.

A borrower can tailor the amount spent and repayment according to their needs and capacity. Revolving credit lines also give the borrower some level of control over how much interest the loan incurs.

Repayment period

There is no set monthly payment with revolving lines of credit. After each month, the borrower gets a bill of the balance showing the amount used and what’s left. You can repay the full amount owed or choose to make a partial payment. However, there is a minimum amount that must be paid.

If partial payment is made, the lender rolls over the unpaid debt to the next month and the payable interest increases.

Interest rates

Because of the quick processing speed and flexibility of revolving credit, lenders typically charge higher interest rates compared to traditional installment loans.

Secured lines of credit usually have lesser interest rates than unsecured revolving credit, because it requires you to sign a personal guarantee or secure collateral.

Secured or unsecured

A revolving credit account can be secured by collateral or unsecured. The collateral for secured credit can be a tangible asset, like a house or car. Collateral can also come in the form of invoices or accounts receivables.  Alternatively, you can agree to the use of a blanket UCC lien.

Collaterals minimize the lender’s risks and that makes interest rates on secured revolving credit accounts much lower than those on unsecured credit accounts. If you want to borrow a lot of money, secured lines of credit are usually the best way to go.  Many unsecured options can cap the loan amount at $500K. 

Benefits of a Revolving Line of Credit

Imagine having to fill out applications every time your small business is in need. Stressful and messy, wouldn’t it? But what if your business requires constant funding? Revolving credit might be just what you need.

Banks are not exactly eager to offer unsecured personal loans to customers. No lender would offer a customer multiple term loans when they still have unpaid loans. Also, it is not economically prudent for a borrower to take out a loan every month or two, repay it, and then borrow again.

A revolving line of credit for small business offers a solution to all of these issues by making an amount of money available if and when the borrower needs it. Its built-in flexibility is its main advantage. 

Uses of Revolving Line of Credit Loans

A revolving credit account is not tailored for specific business use. It can be used for a wide range of business purposes.  Small business owners can apply it to meet working capital funding needs and take advantage of strategic and time-based opportunities.  

Pros and Cons of Business Revolving Line of Credit


  1. Unlike traditional loans which must be paid in equal and regular monthly installments, revolving lines can be paid anytime at any amount.
  2. Revolving line of credit interest rates are flexible. 
  3. Revolving credits are like auto loans, you don’t need to fill out fresh applications every time you need money.
  4. Great in times of emergencies like repairs and opportunity buys.
  5. No interest accrues until you draw funds and you only pay interest on the money you use.
  6. A properly managed revolving line of credit serves as a good way to build credit.


  1. Unsecured LOCs have higher interest rates and credit requirements than those secured by collateral.
  2. Penalties for late payments and going over the credit limit can be severe. And you should keep your credit utilization ratio under 30%.
  3. Charged interest is usually high and varies from lender to lender.

Revolving vs Non-Revolving Line of Credit

Revolving and non-revolving credit are two different types of the same credit line financing arrangements. They are similar in the way they operate but differ in how long the arrangement lasts.

In revolving credit the account remains open until the lender or borrower closes it. A non-revolving line of credit, on the other hand, is a one-time financial arrangement, and when the credit line is paid off, the lender closes the account.

Who Qualifies for a Revolving Line of Credit?

Before granting the line of credit to an applicant, a bank or online lender first considers the applicant’s ability to repay and service the debt. They look at the credit score, financial stability, job, and income of the borrower.

For businesses, they will look at the bank statements, financials and tax returns. 

Businesses with a steady income, tax and financial records that have been in operation for more than a year qualify for revolving credit.

Can I Get a Revolving Line of Credit with Bad Credit?

Yes, some lenders will offer you a line of credit even when your credit scores are bad. The common conditions are a short repayment term and higher interest rate, if you’re applying for a line of credit with bad credit.

Requirements for a Revolving Credit Account

Lenders normally prefer businesses or persons with great credit that meet a credit score above 600 and your business must have been in existence for at least 6-12 months. You will need to present your business and personal tax records, business registration documents, business financial statements and credit references.

Apply for Revolving Lines of Credit

You can apply online for business revolving credit and get an approval in a day or two.  We work with every major line of credit lender and will save you the time of having to apply with each and get declined.  This causes you to run your credit multiple times until you fight the right source.  Working with Upwise – we’ll know which LOC lender will be the best fit for your qualifications. 

Our team at Upwise Capital is here to assist you with every step of the way to secure whatever equipment is needed to help your business grow. If you have any questions regarding how equipment financing works, please call our team at 77-55-UPWISE or email [email protected]

So…What do you think? 

We want to hear from you.  What do you think of this article and was it helpful in your search for a revolving line of credit? 

Let us know by leaving a reply below.   Feel free to share this article on your social media. 


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