Small Business Dictionary

Line of Credit

A Line of Credit, or Business Line of Credit, provides access to an unsecured (no collateral required), revolving credit account, usually issued by financial institutions to businesses that are at least two to four years old. A Line of Credit for small businesses typically has a variable interest rate tied to the Prime Rate, is for $5,000 to $100,000, and, unlike a business loan, you can start with no balance and only pay interest on the amount that is used. A borrower can draw down and repay the Line of Credit more than once but can’t borrow more than the credit line amount. Larger lines of credit may require annual renewal.