A business line of credit you only pay for when you use it.

A business line of credit gives you an approved limit you can draw on whenever you need funds, and you only pay interest on the amount you have drawn. Repayments reduce the balance and free up the limit again, so the facility revolves rather than running down like a term loan. Most facilities are reviewed every 12 months. Funds are usually transferred to your business account the same or next business day, which is why lines of credit are commonly used for wages, stock, supplier payments and timing gaps between paying and being paid.

A business overdraft is attached to your everyday transaction account and is usually offered by your bank, while a business line of credit is a standalone facility that can come from a bank or a non-bank lender. Both are revolving and both charge interest only on what you use. Non-bank lines of credit are typically approved faster from bank statements and are often available without property security, whereas bank overdrafts tend to require more documentation but can be cheaper. Your broker compares the total cost of each, including line fees, before you decide.

Choose a line of credit when your funding need rises and falls, and a term loan when you need a set amount for a one-off purpose. A line of credit suits seasonal businesses, project-based work and cash-flow timing because you draw only what you need. A term loan suits a defined cost such as a fit-out or a vehicle, because it gives a fixed repayment schedule and often a lower rate. Many businesses run both: a term loan for the big purchase and a line of credit as a working buffer.

Interest is calculated daily on the drawn balance and charged monthly, usually at a variable rate, so an undrawn line costs no interest. If you draw $40,000 of a $100,000 limit, you pay interest on $40,000 only. Rates on unsecured lines of credit in Australia are generally higher than on secured facilities, reflecting the flexibility and lack of security. Because the rate is variable, it can change over the life of the facility, and your broker explains how each lender sets and reviews its rate.

The common fees are an establishment fee when the facility is set up, and either a monthly line fee or an annual facility fee that some lenders charge whether or not you draw. A few lenders charge a small fee per drawdown instead. Always compare the total cost of holding the facility for a year, not just the interest rate, because a low rate with a high line fee can cost more than the reverse. Any brokerage is disclosed to you in writing before anything is submitted.

Not always. Unsecured business lines of credit are available in Australia, typically up to around $500,000, and are assessed on trading history, turnover and bank statements rather than property. A director’s guarantee usually applies. Secured lines of credit, backed by property, equipment or receivables, generally offer higher limits and lower rates. Your broker explains what security each lender requires and what a guarantee means for you personally before you decide.

Limits commonly range from $10,000 to $500,000 for unsecured facilities, with larger limits available when security is offered. Lenders usually set the limit as a proportion of your monthly turnover and consistency of deposits, rather than on a single figure. A business with steady turnover and 12 months of trading will generally qualify for a higher limit than a newer business with variable income. Limits can be reviewed upward as the business grows.

Most lenders look for an active ABN, at least 6 to 12 months of trading, and consistent monthly turnover, typically above $10,000. Sole traders, partnerships, companies and trusts can all apply. Lenders assess recent business bank statements, existing debts and credit history, and some will consider businesses with past defaults if trading is strong. Lyft Money checks fit across the panel first, so only lenders likely to approve are approached.

Unsecured lines of credit from non-bank lenders are commonly approved within 1 to 3 business days once bank statements and identification are provided, and drawdowns are usually paid the same or next business day. Bank facilities and secured lines take longer because they need financials and, where property is involved, a valuation. Tell your broker your deadline and they will explain which lenders can meet it.

It can. You pay no interest on undrawn funds, but some lenders charge a monthly line fee or an annual facility fee to keep the limit available, and most review the facility each year. Others charge nothing until you draw. If you expect to use the line only occasionally, a facility with no line fee may be cheaper overall even at a higher interest rate. Your broker sets these options side by side so you can see the yearly cost of each.