A business line of credit explained

A business line of credit is a credit facility that allows your business to access funds up to an agreed limit. Similar to an overdraft or credit card, it can be used whenever you need a quick cash injection into your business, such as when customers are late paying or you need to make a purchase. Typically, you’ll be charged only on the amount you borrowed.  

What is a revolving line of credit?

In some cases the line of credit will be available for a limited period of time, after which the facility will be withdrawn, and any further borrowing will require a new application. A revolving line of credit, on the other hand, means that you only need to apply once, and the funds can be used again as soon as they’re repaid. 

Secured or unsecured line of credit

A secured line of credit means that your business puts forward collateral in the form of assets in order to secure the credit. The short term nature of a business line of credit means that the assets in question would normally only have to be short term, as opposed to the kind of capital assets like property or plant required for most secured loans. 

Short-term assets of this kind might include stock and accounts receivable. If you fail to repay the line of credit then the borrower could sell the asset put forward as collateral and use the proceeds to clear the debt. 

An unsecured line of credit is one in which no collateral is put forward, making it more flexible and less reliant on a business having assets available. The credit limit or other terms may differ, and some lenders may ask for a personal guarantee.   

The difference between a line of credit and a loan 

A term loan for a business is borrowed in the form of a one-off lump sum which is then paid back in regular instalments over an agreed period of time. Term loans are usually available in higher amounts than a line of credit, and are typically used less frequently or to fund larger projects. 

A line of credit on the other hand is designed to be used many times and is available on an ongoing basis. Providing you have credit available, you can use it as frequently as you like, making it more suitable for topping up your cash flow when needed.

FlexiPay – the interest-free line of credit 

FlexiPay is a business line of credit that you can use to spread almost any business cost. Available up to £250,000, it is free to set up and you only pay when you use it, making it commitment free. 

When you have a business cost to pay, simply pay it with FlexiPay and repay in 3 monthly instalments for a flat fee. You can use it for business bills including tax, supplier invoices, bulk buying stock, purchases and more. 

To see how a FlexiPay line of credit can help your business, apply today with no impact on your credit score.