Business line of credit
A business line of credit is a pre-agreed limit a company draws from, repays and draws from again, paying interest only on the balance outstanding. The phrase is the American umbrella term; in the UK the products that actually deliver one are the revolving credit facility (the closest equivalent), the business overdraft, the business credit card and drawdown invoice finance. Best for recurring, lumpy working-capital needs, stock cycles, VAT quarters and payroll timing, rather than one-off defined purchases.
Founder & Managing Director, Muswell Rose, FundBiz
Adam is the founder and managing director of Muswell Rose and a founder of Best Business Loans Ltd, the company behind FundBiz. His background runs through commercial finance, mortgages and fintech, including as managing director of an invoice finance business. He oversees FundBiz's specialty finance comparison and the logic behind how businesses are matched to lenders.
Last reviewed: 18 July 2026
At a glance
- Best for
- Recurring, variable working-capital needs
- UK equivalent
- Revolving credit facility, overdraft, card, invoice finance
- Interest
- On the drawn balance only
- Repayment
- Flexible: repay and redraw within the limit
- Poor fit for
- One-off defined purchases (take a term loan)
- Scope
- Ltd companies, LLPs, partnerships of 4+
The four UK products that deliver a line of credit
| Product | How it works | Fits best when |
|---|---|---|
| Revolving credit facility | Agreed limit with a specialist lender; draw, repay, redraw; rate on drawn balance | The main need is flexible cash headroom beyond what a bank overdraft offers |
| Business overdraft | Borrowing buffer on the business current account | The need is small and occasional, and your bank will agree a useful limit |
| Business credit card | Monthly card limit with an interest-free window on purchases | Spend is card-shaped: subscriptions, travel, supplier payments |
| Invoice finance drawdown | Advance available against unpaid invoices, drawn as needed | Cash is tied up in the debtor book and the ledger keeps refilling the limit |
Source: FundBiz product structure overview
View as plain-text Markdown
### The UK products that give a business draw-and-redraw credit, and where each fits. Terms vary by lender and company profile. | Product | How it works | Fits best when | | --- | --- | --- | | Revolving credit facility | Agreed limit with a specialist lender; draw, repay, redraw; rate on drawn balance | The main need is flexible cash headroom beyond what a bank overdraft offers | | Business overdraft | Borrowing buffer on the business current account | The need is small and occasional, and your bank will agree a useful limit | | Business credit card | Monthly card limit with an interest-free window on purchases | Spend is card-shaped: subscriptions, travel, supplier payments | | Invoice finance drawdown | Advance available against unpaid invoices, drawn as needed | Cash is tied up in the debtor book and the ledger keeps refilling the limit | Source: FundBiz product structure overview
The closest one-for-one match to the search phrase is the revolving credit facility, which has its own dedicated page covering pricing, limits and setup. Card-shaped spending sits with business credit cards, and unpaid-invoice headroom with our sister site MarketInvoice.
Why the vocabulary trips people up
"Line of credit" is the standard term in the United States, and much of the content UK owners read online is American, so UK lenders field the phrase constantly while offering products under different names. Nothing is lost in translation except the label: a UK revolving credit facility behaves the way a US line of credit does. When comparing, ignore the naming and compare the mechanics: the limit, the rate on drawn funds, any non-utilisation fee, the review cycle, and what security or guarantee is asked for.
Line of credit vs term loan
The decision usually settles itself once the purpose is written down. A defined one-off spend, a machine, a refit, an acquisition, points to a term loan with a fixed schedule. A recurring gap that opens and closes, stock before a busy season, a VAT quarter, the fortnight between payroll and customer receipts, points to a line of credit, because you only pay interest for the days you are actually using the money. Many established companies run both: a term loan for the big purchase, a revolving line for the rhythm of the month.
Frequently asked questions
What is a business line of credit?
A business line of credit is a pre-agreed borrowing limit a company can draw from as needed, repay, and draw from again, paying interest only on what is outstanding. The phrase is the American umbrella term; in the UK the same thing is delivered by several distinct products: the revolving credit facility, the business overdraft, the business credit card and drawdown-style invoice finance.
Is a business line of credit the same as a revolving credit facility?
In UK practice, yes, near enough. The revolving credit facility (RCF) is the closest direct equivalent: an agreed limit with a specialist lender that the business draws and repays flexibly, priced as a rate on the drawn balance. If you searched for a business line of credit, an RCF is usually the product a UK lender will actually offer you.
How is interest charged on a line of credit?
Interest accrues only on the drawn balance, for the days it is drawn, not on the whole limit. Some facilities add a small commitment or non-utilisation fee on the undrawn portion, and card products work on monthly interest with an interest-free window on purchases. Always compare the total cost of the way you will actually use the facility, not the headline rate.
Can a new limited company get a business line of credit?
It is harder than for an established company but not impossible. Lenders set limits from trading evidence: bank statements, card takings and, later, filed accounts. A young company will usually be offered a smaller limit, or a card product first, with the limit growing as trading history builds. Where the need is tied to unpaid invoices, invoice finance can be available earlier because the debtor book secures it.
Line of credit or business loan: which fits?
A term loan suits a one-off, defined spend: a purchase, a project, a refit. A line of credit suits a recurring, lumpy need where the amount and timing vary: stock cycles, VAT quarters, payroll timing. If you would draw the money down once and repay over years, take a loan. If you would dip in and out, a line of credit is usually cheaper because you only pay for what you use.
Who is eligible for finance through FundBiz?
UK limited companies, LLPs and partnerships of 4 or more. Sole traders are out of scope. Checking eligibility uses a soft search, so it leaves no footprint on your credit file.
Related finance
See the revolving credit facility for the main UK product, cash flow loans for a lump-sum alternative, short term business loans for defined 3-to-18-month borrowing, and current business loan interest rates for what facilities cost right now.
See what credit line your company could agree
Open the eligibility checker →Soft search, no credit-file footprint. Limited companies, LLPs and partnerships of 4+ only.
Last reviewed: 18 July 2026.