Quick answer
A business line of credit is a standing limit you can draw on, repay and draw again, rather than a lump-sum loan. For trading businesses it is typically sized on turnover and bank statements, within the usual $5,000 to $500,000 unsecured range. Once it's set up, drawing funds is usually the fastest money a business can access, because the approval has already happened.
Key points
- Approved once, then drawn whenever you need it
- You generally pay for what you use, not the whole limit
- Suits recurring or unpredictable cash gaps
- Sized on turnover and business bank statements
- Type
- Revolving limit
- Typical size
- Within $5k – $500k unsecured
- Speed to draw
- Usually fastest once set up
- Best for
- Recurring gaps
Why is a line of credit the fastest money once it’s set up?
Every other loan on this site has to be assessed when you need it. A line of credit is assessed before you need it. Once the limit is approved, drawing on it is usually a matter of a request through the lender’s system, and the money lands far quicker than any fresh application could.
That flips the usual race. Instead of sprinting for funding the day a supplier bill or wage run catches you short, you’re already standing at the finish line. For businesses whose cash flow lurches up and down, that’s worth a great deal.
Who is a line of credit built for?
Lines of credit suit businesses with gaps that come back again and again:
- Seasonal businesses, such as tourism operators in the Whitsundays or ski-field suppliers in the Snowy Mountains, that spend heavily before their busy months
- Contractors and tradies paid on 30 to 60-day terms who have to pay crews and materials up front
- Wholesalers and importers who buy stock months before it sells
- Retailers gearing up for Christmas, end of financial year sales or back-to-school
If your gap is a one-off, such as a single tax bill or one big purchase, a lump-sum cash-flow loan is often simpler.
How is the limit worked out?
Most business lines of credit are unsecured and sized on what the lender sees in your bank statements. Typical considerations:
| What the lender looks at | Why it matters |
|---|---|
| Average monthly deposits | Sets the baseline for the limit |
| Consistency of income | Steady businesses get bigger, cheaper limits |
| Days the account is overdrawn | Frequent overdrawn days reduce confidence |
| Existing loan repayments | Leaves less room for a new commitment |
| Time trading | Longer history supports a larger limit |
Unsecured options typically run from $5,000 to $500,000, and a line of credit sits within that range. Bad credit and ATO debt are considered case by case.
Line of credit, overdraft or loan?
A bank overdraft works similarly but is attached to a transaction account and usually requires a full bank application, sometimes with property security. A private line of credit is often quicker to set up and assessed mostly on trading. A lump-sum loan is best when you know exactly how much you need and for how long.
Illustrative example: a landscaping business in Perth’s south invoices on 30-day terms but pays wages weekly. In spring, when jobs pile up, there are regularly two or three weeks where wages outrun receipts. A $60,000 line of credit lets the owner draw $25,000 in a tight week and repay it when invoices clear, rather than applying for a new loan every few months.
What does a line of credit cost?
Every facility is priced on the business’s circumstances. Costs can include interest on what you’ve drawn, a fee to keep the limit open, establishment fees and fees for each drawdown. Read the offer closely and ask how costs change if you draw the full limit for a long stretch. A line of credit that’s permanently maxed out is a sign the business needs a different solution, such as a term loan or a fix to its payment terms.
How do I use a line of credit well?
Treat it as a bridge, not a second income. Draw what the gap needs, repay as soon as customer money lands and keep track of how often you’re dipping in. The Cash Gap Calculator helps you size each draw. Our guide on early warning signs of a cash gap helps you spot the next one before it bites.
What do I need to apply quickly?
- Photo ID for directors or owners
- ABN and business details
- Six months of statements from your main business account
- Details of any existing business loans or facilities
That’s usually enough to get a decision moving. Want one in place before the next crunch? Start a 60-second enquiry.
When is a line of credit not the right answer?
If the business needs a large sum once, has no trading history to speak of or needs money for a long-lived asset, look elsewhere. Large or long needs are often better served by property-secured lending. Equipment is usually better on equipment finance. A specialist will tell you straight if a line of credit isn’t the best fit.
Can I have a line of credit and a loan at the same time?
Yes, many businesses do. A common pattern is a property-secured loan for a big one-off purpose, such as buying out a partner, alongside a smaller line of credit for everyday swings in cash flow. Lenders look at the combined repayments, so be open about every facility the business already has. It’s better to structure them together than to discover later that one commitment squeezes the other.
See if a standby limit suits your business
Asking costs nothing on your credit file, because there’s no credit check when you first enquire. We don’t push your details out to a stack of lenders. A real person reads your enquiry, looks at how your cash moves and calls to explain whether a line of credit, a loan or something else gets you there fastest.
Please fill in the form accurately, including the limit you have in mind and your state, so the first match is the right one. See if you qualify.
Frequently asked questions
How is a line of credit different from a business loan?
A loan gives you one lump sum, repaid over a set term. A line of credit gives you a limit you can draw, repay and redraw as needed. It suits needs that come and go.
How quickly can I set one up?
Setting up a line of credit takes an assessment similar to an unsecured loan, based largely on your bank statements. Once it's in place, drawing funds is usually very quick.
Do I pay interest on the whole limit?
Usually you pay interest on the amount you've drawn, though some facilities charge a fee for keeping the limit available. Check the offer for every cost.
Can a new business get a line of credit?
It's harder, because the limit is sized on trading history. Most lenders want to see a steady run of deposits before setting one up.
Is a line of credit good for buying equipment?
Generally not. A line of credit suits short-term working capital. Long-lived assets are usually better funded with equipment finance or a term loan.
