A limit you can draw against
A business line of credit generally provides access to funds up to a set limit. Amounts repaid may become available again, subject to the agreement. This differs from taking a fixed sum and repaying it over a single schedule.
The limit is not a permanent entitlement to funds. Facilities may be reviewed, changed or subject to conditions. Understand when the lender can restrict access and what repayments are required.
Interest is only part of the comparison
Check how interest is calculated, whether there are fees for establishing or maintaining the facility, and whether charges relate to the approved limit, usage or individual drawings. Ask about minimum repayments and any requirement to reduce the balance periodically.
Compare flexibility with discipline: repeated drawing without reducing the underlying balance can turn a short-term tool into a long-term cost.
Term loan or revolving credit?
| Question | Term loan | Line of credit |
|---|---|---|
| How is money accessed? | Agreed advance | Drawings subject to a limit and conditions |
| What is the common planning focus? | A defined project and repayment period | Recurring timing gaps |
| What must be checked? | Full repayment schedule | Review dates, drawdown rules and all fees |
Swipe or scroll the table sideways to see every column.
What to prepare
- The expected maximum funding gap
- Frequency of drawings and repayments
- Current cash flow and existing facilities
- A plan to reduce the balance
Common questions
Will I pay only for what I use?
Interest may be based on the drawn balance, but other fees may apply to the facility or limit. Check the full pricing schedule.
Is a business overdraft identical?
They can share revolving features, but account arrangements and terms vary. Compare the actual product documents.
General information only. Product terms and availability vary. Check the actual proposal and obtain advice appropriate to your circumstances.