Line of Credit
A flexible loan allowing businesses to borrow up to a limit as needed.
A business line of credit provides access to a set amount of funds that you can draw from as needed, repay, and borrow again. Interest is only charged on the amount currently outstanding, not the full credit limit. Lines of credit are ideal for managing cash flow gaps, seasonal fluctuations, and unexpected expenses.
Example
A retailer has a $50,000 line of credit and draws $20,000 to purchase extra inventory before the holiday season, repaying it in January from holiday sales revenue.
Why It Matters for Your Business
A line of credit provides a financial safety net for cash flow gaps without the commitment of a term loan, keeping your business resilient during slow periods.
Related Terms
More Banking Terms
ACH
Automated Clearing House - an electronic network for financial transactions.
APR
Annual Percentage Rate - the yearly cost of borrowing including fees.
APY
Annual Percentage Yield - the real rate of return on savings including compound interest.
Bank Reconciliation
Matching bank statements with internal records to identify discrepancies.
Business Checking
A bank account designed for business transactions.
Related Financial Guides & Resources
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