Working capital funding
Advances and short-term loans.
Funding option
Business line of credit: the flexible option, with the fine print
A line of credit is a limit you can draw against, repay, and draw again. You pay interest only on what you have drawn. For businesses with recurring cash-flow swings, it is often the best-fitting product, provided the fees do not quietly eat the flexibility.
How it works
- Limit: the most you can have outstanding at once.
- Draws: transfers to your bank account, sometimes with a per-draw fee.
- Repayment: weekly or monthly minimums on the outstanding balance; some online lines amortize each draw over a fixed number of weeks.
- Revolving: as you repay, the room to borrow comes back.
Secured vs. unsecured
| Secured line | Unsecured line | |
|---|---|---|
| Collateral | Receivables, inventory, equipment, or a blanket lien | None specific, but usually a personal guarantee |
| Typical cost | Lower | Higher |
| Typical size | Larger | Smaller |
| Who offers it | Banks, asset-based lenders | Banks (strong files), online lenders |
The fees that matter
- Draw fees (a percentage of each draw, stated in the offer) can turn a low rate into a high effective cost if you draw often.
- Maintenance or inactivity fees charge you for having the line even when unused.
- Variable rates move with a benchmark; know the margin and the cap.
- Annual review: banks can reduce or cancel a line if your financials weaken, which is exactly when you need it. Keep a cash buffer anyway.
Line vs. term loan vs. advance
Use a line for recurring, temporary needs: seasonal inventory, payroll timing, a customer who always pays in 60 days. Use a term loan for a one-time purchase with a long payoff. Use an advance only for a short, one-off gap when a line is not available in time. Detailed comparison.
How to qualify
Lines reward track record. Bank programs generally look for operating history, profitability, and solid personal credit; online lines tend to relax those in exchange for higher pricing and smaller limits. Opening a modest line before you need it, and using it lightly, is the classic way to build toward a larger one.
What Fast Mula is and isn't. Fast Mula helps you compare business-funding structures and submit one inquiry. Nothing on this site is an offer, approval, guaranteed rate, or guaranteed timeline. Any funding depends on a provider's own review, and terms vary by state.
Common questions
Does a business line of credit affect personal credit?
It can. Many small-business lines require a personal guarantee, and some lenders report to personal credit bureaus or run a hard inquiry at application.
Can a startup get a line of credit?
Rarely from a bank. Some online lenders offer small lines after six months of revenue. Business credit cards are the more common starting point.
What is a good interest rate on a business line of credit?
Bank lines are commonly priced as a margin over a benchmark rate; online lines are priced differently and often include draw or maintenance fees. Compare offers on total annual cost at your expected usage, not the headline rate.
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See which options fit your numbers
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