Quick answer
A business line of credit is an approved limit you can draw from, repay and draw again, paying for what you use. In Australia, unsecured lines for trading businesses are typically sized on turnover and bank statements, within the $5,000 to $500,000 range. Set-up takes a little longer than a one-off loan, but once it's open, drawing funds is usually the fastest capital a business can get.
Key points
- Set up once, then draw and repay as often as you need.
- Unsecured limits are sized on turnover and bank statements.
- Slower to open than a one-off loan; fastest of all once open.
- Best for gaps that come and go — seasons, slow payers, lumpy orders.
- Typical limits
- Within $5k – $500k
- Security
- Unsecured or property-backed
- Draw speed
- Fast once approved
- Pay for
- What you use
Why does a line of credit count as “fast” capital?
Because the slow part happens once. With a one-off loan, every time cash gets tight you go through an application. With a line of credit, the assessment happens when the limit is set up — then each time you need money, you simply draw. For businesses whose cash gap comes back every few weeks or every season, that’s the difference between a quick transfer and another round of paperwork.
The trade-off is at the start. Approving a limit you can use repeatedly takes a little more checking than approving a single amount. So the best time to open a line of credit is before you’re desperate for it.
How is the limit worked out?
For unsecured lines, the main inputs are the same as a cash flow loan:
- average monthly turnover and how steady it is
- how the account is run — dishonours and overdrawn days matter
- existing loans, leases and payment plans
- time in business and industry
Where there’s property behind the facility, larger limits become available within the $20,000 to $5,000,000 property-secured range. That suits businesses whose swings are big — a builder waiting on progress claims, a wholesaler stocking up before a peak.
Line of credit or working capital loan?
| You need… | Better fit |
|---|---|
| A one-off amount for a defined job | Working capital loan |
| Cash that comes and goes through the year | Line of credit |
| Money tied up in unpaid business invoices | Invoice finance |
| A safety net you may never touch | Line of credit |
| A large amount for a long-term purpose | Term loan or property-secured loan |
A simple rule: if you can name the date the problem ends, a loan usually fits. If the problem comes back, a line usually fits.
What does a line of credit actually cost?
Pricing depends on the business, the lender and whether security is involved, so we don’t publish rates. What matters for planning is understanding the moving parts:
- Usage costs — charged on what you’ve drawn, for the time it’s drawn
- Facility or line fees — sometimes charged on the full limit, used or not
- Draw fees — some lenders charge per draw
- Establishment fees — one-off, at set-up
Add them together for a realistic year of use. A line drawn heavily for two months and then repaid can be very efficient. A line sitting fully drawn for twelve months is usually a loan in disguise, and often a more expensive one.
An illustrative example of using a line well
A landscaping business does most of its revenue between September and March. Through winter, wages and equipment leases keep going while jobs slow down. It opens a line of credit in autumn, while statements still show a strong summer. In June and July it draws to cover payroll, then repays steadily from October as the busy season pays out. By Christmas the line is back to zero and ready for next year. (Illustrative only.)
Compare that with applying for a fresh loan each July — every year, under pressure, with winter statements. Our page on seasonal peaks goes deeper on planning around the calendar.
How do I open a line of credit quickly?
- Apply while trading is strong, not in your weakest month
- Have six months of business bank statements ready to download
- Know your existing commitments, including any ATO arrangement
- Decide on a sensible limit — enough for your worst month, not your wildest plan
When you’re ready, ask what limit your business might support. For anything that needs to land this week, see business capital this week.
What mistakes do businesses make with a line of credit?
A line of credit is flexible, and flexibility cuts both ways. The common traps:
- Using it for long-term purchases. Equipment, fit-outs and vehicles usually belong on equipment finance or a term loan, where the repayment period matches the life of the asset.
- Never bringing it back to zero. If the balance hasn’t dropped in six months, the gap isn’t temporary any more. Look at the cause — pricing, debtor days, stock — rather than raising the limit.
- Setting the limit for the best month. A limit sized for your most ambitious plans tempts you to draw it. Size it for your worst realistic month instead.
- Forgetting the tax calendar. BAS, PAYG instalments and super land on known dates. Map them against your draws so the line covers them on purpose, not by accident.
- Ignoring the repayment rhythm. Some facilities sweep repayments automatically from incoming deposits. Make sure that suits the way your customers pay.
Treat the line as something you check monthly: what’s drawn, why, and when it comes back. That habit alone keeps most businesses using it the way it was designed.
Is a line of credit right for your business?
A line of credit is at its best as a shock absorber: quietly there, used for weeks rather than years, repaid as customers pay. If that sounds like the problem you’re solving, it’s worth a conversation. Asking doesn’t involve a credit check, and your enquiry isn’t passed around to a crowd of lenders — a real person looks at it and calls you. Fill in the form carefully, with your real turnover and amount, so the limit we talk about is realistic from the start. See what your business could open.
Frequently asked questions
How does a business line of credit work?
You're approved for a limit. You draw some or all of it when you need cash, repay as money comes in, and the repaid amount becomes available to draw again. Costs generally relate to what you've drawn and for how long, plus any facility fees.
How long does it take to set up a business line of credit?
Usually a little longer than a one-off unsecured loan, because the lender is approving an ongoing limit. Once it's in place, drawing on it is typically very quick.
What's the difference between a line of credit and an overdraft?
They're close cousins. An overdraft is attached to your transaction account; a line of credit is often a separate facility you draw into your account. Specialist lenders tend to offer lines of credit rather than overdrafts.
Can I get a line of credit with bad credit?
Possibly. Past credit issues are considered case by case. Strong recent bank statements carry a lot of weight for unsecured lines.
Should I keep my line of credit fully drawn?
Ideally not. A line that's always fully drawn is acting like a loan that never ends — it may be cheaper and cleaner to convert that portion into a term loan.