Compare business credit lines

A business line of credit allows you quick access to additional funds for your company. For many, it provides a promising alternative to a business loan or credit card.

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Chris Lilly
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Comparison of business lines of credit

Table: sorted by representative APR
Name Product Loan type Loan amounts Loan terms Turnover/trading criteria
Ultimate Finance FlexiCredit
Ultimate Finance FlexiCredit
Variable rate secured line of credit
£25,000 to £75,000
3 months to 24 months
£600,000 minimum turnover,
no specified minimum time trading
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Capital on Tap Business Loan
Capital on Tap Business Loan
Variable rate unsecured line of credit
£1,000 to £50,000
1 month to 12 months
£24,000 minimum turnover,
no specified minimum time trading
Representative example: When you spend £1,200 at a purchase rate of 39.9% (variable) p.a., your representative rate is 39.9% APR (variable).
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A business line of credit allows you to borrow money as and when you need to, up to an agreed limit and only pay interest on your outstanding balance and the days on which you borrow.

Many business owners will find this form of credit more flexible than a business loan, plus you’ll usually be offered a higher credit limit than with a credit card. We cover business lending available under the government’s Recovery Loan Scheme in a separate guide to government coronavirus support for businesses.

How does it work?

Different business credit lines work differently, but the basic premise is a similar to a credit card or overdraft. You borrow what you need, when you need it, only pay interest on the amount borrowed for the days on which you were borrowing, then pay the money back as and when it suits you (subject to a minimum monthly repayment).

Once you’ve successfully applied for a line of credit, it’s there and available to dip into until you close your account.

Lenders may require you to secure your credit with collateral and it’s also possible that you’ll be charged administration fees on top of your interest payments.

While some products have specific “draw periods”, during which you can spend money from your line of credit, followed by “repayment periods”, most products allow you to access the funds whenever you need to (subject to your credit limit). This means it’s usually possible to “top up” your borrowing whenever you like – even if you’re still paying off earlier borrowing.

Is a business line of credit suitable for me?

A business line of credit is handy for businesses that frequently need access to additional finance, perhaps due to unpredictable cashflow issues or a lack of capital.

It’s often used to fund sporadic operational expenses or emergency purchases, rather than large one-off payments (which can be planned for in advance). It could also work well as a means of working capital during the off-season for cyclical businesses. If you’re planning to make a large purchase to launch or scale your business, it will usually work out cheaper and easier to obtain a business loan.

Many business line of credit lenders will only consider applications once you’ve been in business for at least one year. Factors including your business credit score and annual revenue figures will be used to consider your eligibility.

If you currently use a business overdraft but aren’t happy with it, a line of credit could be a decent alternative.

How to choose the best business line of credit

Here are some questions you can ask to compare your options:

  • Can my business afford it? This should always be the main factor in your decision. Before taking out any type of debt, be sure to calculate all associated costs and make sure your business’s cash flow is able to take on new monthly repayments.
  • How much will it cost me? Besides the interest rate, check to see what fees you’ll be charged, including one-off fees such as application, line and establishment fees. The lender may also include ongoing fees such as loan service or annual fees.
  • When will I receive my line of credit? Make sure the lender you choose can provide your funds when you need them. Otherwise, you’ll be wasting lots of time, resources and money.
  • How often do I need to make repayments? Most business lines of credit require a minimum monthly repayment. However, if you can afford to pay off your balance in full, you’ll avoid unnecessary interest charges.
  • Will I need to secure my loan? Some business lines of credit may need to be secured, meaning you may be required to put up an asset as collateral.

Business loan vs business line of credit

Business loans tend to be better for large one-off purchases and are available to a wider range of businesses. A business line of credit can be more suitable if you anticipate making multiple purchases at different times.

Business loan

Business line of credit

  • Typically lower interest rates and less additional fees.
  • Typically higher interest rates and more additional fees.
  • Available to start-ups and established businesses.
  • Stricter eligibility criteria.
  • Pay interest on the whole loan.
  • Pay interest on the amount borrowed only.
  • Borrow one lump sum only.
  • Make extra withdrawals with ease.

Business credit cards vs business line of credit

Business credit cards tend to offer better borrowing terms, but you can typically borrow a lot more with a business line of credit.

Business credit card

Business line of credit

  • Typically lower interest rates.
  • Typically higher interest rates.
  • More simple to apply and be accepted.
  • Can be more complicated to apply and be accepted.
  • More rewards and promotions attached.
  • No rewards and promotions attached.
  • Unsecured credit.
  • Some lenders only offer secured credit.
  • Lower credit limit.
  • Higher credit limit.

How do I get a business line of credit?

You can apply for a business line of credit reasonably quickly via the lender’s website.

You will be asked to provide some personal information, as well as basic details about your business, such as the company type, business address and limited company number.

You’ll also need to provide financial details, including VAT returns, bank statements and assets that can be offered as collateral. You may also be asked the reason you’re applying for a line of credit.

Some lenders will make an instant decision on the success of your application. Others will email you a decision within two to three business days. If your line of credit has been approved, it’s common to be able to access funds on the same business day.

Secured vs unsecured

Secured lines of credit are backed by collateral. These deals are less of a risk for the lender, so will often come with lower interest rates, although you run the risk of losing your assets if you fail to repay your loan.

Some lenders may offer both secured and unsecured lines of credit, although the latter may come with a higher interest rate and closer scrutiny in order to get approved.

Will my business qualify for a line of credit?

Business line of credit lenders will use credit reference agencies to determine your eligibility for their products.

These agencies will calculate your business credit score based on information in your business credit file. This file contains details of your previous credit applications, borrowing history, current debt, debt payment history and the number of years you’ve been in business.

The higher your business credit score, the more likely you’ll be approved for the best line of credit deals. You can check your business credit score by contacting credit reference agencies, such as Equifax, TransUnion and Experian.

Frequently asked questions

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