Business Line of Credit – Is it Right for my Business?

The online lenders we review here provide a fast, effective way to get a quick injection of cash into your business. However, chances are it’s not always a lump sum of cash that your business requires. If, like many businesses, you find that you’re short on working capital from time-to-time then you may prefer a business line of credit. A handful of Australia’s best online lenders for business loans are also some of the best business line of credit companies.

What is Line of Credit?

A business line of credit provides convenient and flexible access to funds from a pre-agreed credit facility. The total size of your business line of credit is agreed at the onset so you don’t have to worry about credit approval each time you seek finance. Rather, you can simply drawdown on your existing credit facility, utilising as much of the funds as necessary, up to your pre-approved limit. 

Loan TypeSecuritiesTermsAvg Loan SizeEstimated Interest Rate
Business Line of CreditUnsecured3-12 months$50,00014%-30%

One of the key features of a line of credit for small businesses is that you only pay interest on the funds you draw, so you don’t have to borrow more than is necessary, as could be the case with a one-off Australian small business loan.

Best Business Line of Credit Companies

#1 – multi-application

If you’re already comfortable with what a small business line of credit is and how does a line of credit work then you can test your eligibility in under 60 seconds with a number of Australia’s best business line of credit companies. By applying through you will receive only the most relevant line of credit solutions from over 20 online lenders, You will not get bombarded by lenders ringing you - you get to choose.

  • Funding: $5,000 to $500,000
  • Smart Matching by LendScore™
  • Instant Responses to Application
  • 97% User Satisfaction
  • Unsecured Business Loans Focused
  • Bank-Level Encryption
  • Not a lender by itself


#2 Prospa

  • Australia’s no.1 Online Lender
  • Line of Credit Available Between $2,000 – $100,000
  • Over 5,000 TrustPilot Reviews, rating Prospa 4.9 / 5
  • Pay Suppliers Directly from your Line of Credit
  • No Asset Security Required for Facilities under $100,000
  • Prospa review here


#3 GetCapital

  • Import Line of Credit, ideal for Businesses Trading Internationally
  • Facility up to $750,000. 
  • Transparent, Top-Rated Non-Bank Business Lender
  • Widest Variety of Lending Solutions out of Australia’s Online Lenders
  • Business Overdrafts and other Working Capital Facilities Available
  • GetCapital review here


#4 Lumi

  • Line of Credit up to $250,000
  • Trusted Direct Lender
  • Drawdown from $2,000 – $250,000
  • Repayments Available for up to 24 months
  • Quick and Easy to Access
  • Lumi review here


How Does a Line of Credit Work?


A Small Business Line of Credit Facility is Agreed Upfront

A line of credit for small businesses is generally offered to borrowers for a period of 12 months. Within the 12 months borrowers can drawdown on their credit line as many times as they like, providing  total borrowing never exceeds the size of the facility. As borrowers repay their credit line they are also eligible to reuse the facility and borrow again. 

Whatever capital you have left in your line of credit will always be available in an instant – simply drawdown on your facility within a few clicks, either online or via your lender’s app. If you prefer to speak to someone then you can of course arrange to borrow against your line of credit simply by giving your lender a call as well. 


Line of Credit Loans Fees & Costs

Charges and fees will be automatically calculated, based on the amount you’ve borrowed and the interest rates you agreed at the onset of your line of credit. 

Whilst you only have to pay interest on the funds you use, you should expect some other fees to be involved. For example, Australia’s leading online lender, Prospa, charges a $195 credit line activation fee and a $25 monthly service fee to retain access to your line of credit. These are pretty standard and nothing out of the ordinary – it incentives borrowers to actually utilise a facility they are paying to have access to. But that’s what you’re paying for essentially – instant access to cash when it’s needed. No stresses or worries about approval, you have your pre-approved facility for 12 months.

Generally, interest on a line of credit for small businesses is more than that of a term loan so it’s definitely something to be aware of – remember you are only paying interest on funds you actually use. A term loan might find you paying interest for cash you have sitting in the bank. 


Secured & Unsecured Small Business Line of Credit

If you’re applying for a line of credit from a bank, then you will almost certainly have to offer an asset, such as residential or commercial property, in order to secure your loan. However, many of the leading non-bank lenders are much more flexible and can issue an unsecured small business loan though a line of credit. No asset security is required upfront to access a Prospa’s line of credit for small businesses up to $100,000 and no property security is required to access GetCapital’s working capital facility up to $250,000.

Remember, if you’re confident in your companies’ ability to repay business line of credit loans then you may actually prefer a secured line of credit facility – reducing the risk to the lender and thus reducing the interest rate you have to pay.


Repayment Schedule and Business Line of Credit Renewal

Usually, repayments on a business line of credit are automatically debited from your bank account every week. Once your 12-month term is up, it’s likely that you’ll need to complete a new assessment with your online lender to see if there have been any changes to your business. If approved, you’ll be able to renew your facility and use it just as you have been for the previous year. If you elect to close your line of credit at the end of the 12-month term, then you’ll either have to repay your facility in full or arrange for further weekly payments to remain in place until the balance on your line of credit is paid off. 


Advantages and Disadvantages to a Small Business Line of Credit

Chances are, a business line of credit will be one of the most important tools your business has for quick access to working capital. There are however other solutions, such as invoice finance, which can achieve a similar outcome. So it’s worth being aware of exactly what the benefits and disadvantages are to a line of credit:

  • Only pay interest on funds you use.
  • Facility agreed upfront – no doubts about approval each time you need working capital.
  • Instant access, fast liquidity.
  • Can be unsecured with non-bank lenders.
  • Covers any unexpected expenses.
  • Small ongoing fees even if you don’t utilise your facility.
  • Can be higher interest than a standard loan.
  • Not the only working capital solution out there.


Final Word – Small Business Line of Credit

Given the uncertain times we find ourselves living in, it’s never been more important to establish a working capital facility that you can count on when unexpected expenses pop up. Whether you’re a small business seeking their first working capital facility or an established business looking to diversify their lending partners, then a business line of credit with a non-bank lender is a sensible move. If you’re looking for the best business line of credit companies then Prospa is a great solution for SMEs – the sheer volume of positive experiences that borrowers have had attests to this. And GetCapital are a great option for larger SMEs who have more complex funding requirements. The tech capability and staff expertise makes GetCapital one of the best business line of credit loans providers in Australia today. It is very highly rated in our small business loan comparison.