A term loan hands you the money once. A line of credit sets a limit you can use, repay and use again, so you borrow only what the business needs, when it needs it.
Underwriting sets a maximum amount: the credit limit. On a secured line, the amount you can actually draw at any time may be a smaller "availability" figure calculated from your collateral (see the borrowing base, below).
You request funds against available credit, in whole or in part.
Interest is generally charged only on the amount drawn and outstanding, not on the unused limit. Some lines also carry fees, such as an origination fee or an unused-line fee; all of them are disclosed in writing before you sign.
As customers pay you, you pay the line down. Repaid principal becomes available to draw again.
Lines are typically reviewed and renewed on a set schedule. A renewal is a fresh credit decision, not an automatic extension.
Funds go out ahead of a large order.
Customers pay; the balance comes down and availability returns.
The repaid amount is available to fund the next cycle.
| Feature | Business line of credit | Private business line of credit |
|---|---|---|
| Funded by | Independent private lenders we arrange with | Independent private lenders we arrange with |
| Best fit | Established operating businesses with steady, documentable cash flow | Businesses with real assets or contracts whose profile, timing or structure falls outside a standard bank program |
| Underwriting leans on | Revenue history, bank deposits, credit profile | Collateral, contracts, receivables, sponsor strength, plus cash flow |
| Structure | Unsecured or secured | Usually secured; tailored covenants and reporting |
| Illustrative size | $100K – $5M, subject to underwriting | $250K – $10M, subject to underwriting |
| Pricing | Set by underwriting; disclosed in writing before signing | Set by underwriting; disclosed in writing before signing |
| Purpose | Commercial only | Commercial only |
Sizes are illustrative and not an offer. Actual terms depend on underwriting, collateral and the capital source, and may differ from these ranges.
Approved on the strength of the business's cash flow and credit. No specific asset is pledged, though lenders commonly still require a personal guarantee from principal owners and may file a UCC financing statement covering business assets. Limits are usually smaller and pricing reflects the lower security.
Backed by business assets: receivables, inventory, equipment, or contract rights. The lender records its interest with a UCC-1 financing statement filed with the state. Security usually supports a larger limit and more room in pricing.
On an asset-based line, what you can draw is recalculated as your collateral changes. Each eligible asset is counted at an advance rate (a percentage of its value) and the total is your borrowing base. Ineligible items are excluded: for example receivables owed by affiliates, long-past-due invoices, or a single customer that is too large a share of the total.
Availability =
Eligible receivables × advance rate
+ Eligible inventory × advance rate
− Reserves
− Outstanding balance
Illustrative structure only. Advance rates, eligibility rules and reserves are set in underwriting.
The limit is the ceiling; availability is what you can draw today.
How long you can draw, and when the balance is due.
Whether pricing is fixed or floats with a published benchmark, and how often it resets.
Origination, unused-line, renewal, and any draw or wire fees. Ask for every one in writing.
Financial tests (for example minimum liquidity or a coverage ratio) and reporting duties such as monthly receivables aging or borrowing-base certificates.
What collateral is pledged, what lien is filed, and who guarantees personally.
How the line is reviewed, how notice works, and what happens to the balance if a line is not renewed.
We walk through each of these with you before anything is signed.