Quick answer
A business line of credit gives you an approved limit that you draw on when cash runs short and repay as money comes in. It suits businesses whose gaps repeat, such as seasonal trades or slow-paying customers. For trading Australian businesses, unsecured facilities are typically $5,000 to $500,000, sized on turnover and bank statements.
Key points
- You get a limit and draw only what you need, when you need it.
- It suits gaps that repeat: seasonal swings, slow-paying customers, regular tax bills.
- Typical unsecured facilities run from $5,000 to $500,000, sized on turnover and bank statements.
- Ask how it is priced, how drawings are repaid and what the limit review looks like.
Think of a business line of credit as a pantry shelf you stock once and raid only when the cupboard runs low. You are approved for a limit, you draw what you need, you repay as the money arrives, and the shelf refills. For businesses whose cash dips and recovers, that rhythm fits better than borrowing a fresh lump sum each time.
How does a business line of credit work?
The mechanics are simple even when the paperwork is not:
- Approval. The lender assesses your trading record, turnover and bank statements and sets a limit.
- Drawing. When you need cash, you draw some or all of the limit.
- Repaying. As money comes in, you pay down what you drew. The structure of repayments varies by facility, so ask what it will do to your weekly cash.
- Redrawing. Repaid amounts are generally available again, subject to the facility terms and any review of the limit.
Business.gov.au lists lines of credit among the standard bank and lender products for funding a business, alongside loans and overdrafts. The distinguishing feature is flexibility.
Who is a line of credit best for?
A line suits an owner whose cash problem is a pattern rather than a single event. Examples:
- a café or retailer with a strong December and a thin February;
- a trade business waiting on 30 to 60 day invoices;
- an online store that buys stock ahead of sale events;
- a business with a regular tax quarter that always lands hard;
- anyone who wants a safety net in place before the squeeze.
If you can name the month the squeeze arrives, a standby limit is often cheaper to carry than panic-borrowing at the last minute. The guide to funding a busy season walks through setting one up in time.
How big a limit could I get?
For trading businesses without property, unsecured facilities are typically $5,000 to $500,000, sized on turnover and bank statements. The limit is anchored in what the business takes in each month and how reliably it does so.
If you own property and need a bigger facility, there are property-backed options from $20,000 to $5,000,000. Our Dough gap calculator will help you see which size of limit would actually matter for your business.
Line of credit or one-off loan?
| Question | Points to a line of credit | Points to a one-off loan |
|---|---|---|
| Does the gap repeat? | Yes, every month or season | No, it’s a single event |
| Is the amount predictable? | Varies | Known and fixed |
| Do you want to pay only for what you use? | Yes | Less important |
| Is it for a purchase with a clear price? | No | Yes |
If you are unsure, say so on the form. A lending specialist can help you see the pattern in your own bank statements.
What should I check before taking one?
- How it is priced. Ask for the total cost of finance in dollars on a realistic draw, plus any establishment or account-keeping fees.
- Review dates. Limits are often reviewed. Know when, and what could change.
- Repayment rhythm. A repayment structure that bites in your quiet weeks defeats the purpose.
- Discipline. A limit that sits there tempts people to treat it as extra income. It is not. It is a bridge.
Business.gov.au also warns that unsolicited offers of funding you did not apply for are likely scams, so be wary of anyone who rings you first.
What does a worked example look like?
Here is an illustration with no real business behind it. A florist with a steady trade has a December peak and a quiet January. In late November she needs $30,000 of extra stock and casual wages for the rush. With a standby limit of $40,000 already in place, she draws $30,000 as the invoices arrive. December’s sales rebuild her account and she repays most of the draw by the end of the month, leaving the remainder to clear in the January lull.
Without the limit, she would have faced one of two unpleasant choices: skimp on stock and lose sales, or scramble for a lump-sum loan in the busiest fortnight of the year. The facility did not make her richer. It made her timing better, which is the entire job of a line of credit.
The same logic applies to a trade business that waits 45 days on invoices or a business that pays a large BAS every quarter. Whenever you can name the squeeze in advance, you can size a limit against it. Our Dough gap calculator is a good place to find the number.
Is it better to set one up before I need it?
Usually yes. Lenders prefer to see a business with healthy statements, not one that is already overdrawn and chasing wages. Setting up a facility when trading is strong means the limit is sized on your good months and sits quietly until you need it. That is why the people who sleep easiest tend to be the ones who arranged it early.
If your business is already in the squeeze, it is not too late; a working-capital loan or short-term loan may help first, with a line arranged afterwards.
Time to see what fits
Ready to check? Tell us about your business in about a minute. Enquiring is free of any credit check, your details are kept with a person who actually reads them, and the sharper your numbers, the faster the right option comes into view. See if you qualify and we will talk it through.
Frequently asked questions
How is a line of credit different from a loan?
A loan is a lump sum with a repayment schedule. A line of credit is a limit you can use in parts, repay and use again. You are generally charged on what you use, but the exact structure varies, so ask for the details in writing.
When does a line of credit beat a loan?
When your shortfalls come and go. If you only need cash for a few weeks each quarter, borrowing a lump sum means paying for money you are not using in the quiet weeks.
Can a new business get a line of credit?
It's harder, because lenders want a trading record to size the limit against. A smaller start, or a property-backed facility, may be an option. Tell us how long you have traded.
Do I need property to get one?
No. Unsecured lines for trading businesses are typically $5,000 to $500,000. A property-backed facility can support larger amounts.
Does it affect my credit file to ask?
A first enquiry doesn't involve a credit check. That only comes up once you decide to go ahead.