How draw-day interest actually adds up, why an undrawn line costs almost nothing, and the discipline that separates a credit line from an expensive term loan.
May 1, 2026 · Relief Capital Funding Desk
A line of credit is a pre-approved ceiling you can borrow against, repay, and borrow against again. Approval happens once; access lasts as long as the facility stays open and in good standing. You draw $20,000 on Tuesday because a supplier wants payment, repay it three weeks later when a customer settles, and the $20,000 is available again. Interest accrues only on the balance you're actually carrying and only for the days you carry it, which is a genuinely different cost model from every fixed-sum product on this site. With a term loan you buy money. With a line you buy the right to money, and you only pay for the days you exercise it — which means the facility can sit open for a year, cost you almost nothing, and still be the most valuable thing on your balance sheet the week a supplier changes terms.
That structure makes it the natural tool for uneven cash flow. Seasonal businesses use it to carry the trough. Contractors use it to fund materials before a progress payment lands. Retailers use it to buy stock in August for a November that hasn't happened yet. In each case the defining feature is that the need is recurring and the amount is unpredictable — precisely the situation where a lump-sum loan either leaves you short or leaves you paying interest on money sitting idle in the account. A line also changes how an owner behaves, which is the part nobody puts in a brochure. Businesses with an open facility negotiate better with suppliers, take the bulk-order discount, and stop making the small expensive decisions that come from watching a bank balance every morning.
Lines come secured or unsecured. A secured line, backed by receivables, inventory, or equipment, generally means a lower rate and a higher ceiling, at the cost of a lien and more reporting. An unsecured line is faster to set up and pledges nothing, with a smaller limit and pricing driven mostly by owner credit and revenue consistency. Neither is automatically better. The right answer depends on whether you're solving for the lowest cost of carry or for the least friction in getting the facility open. A useful rule of thumb: if you expect to run a meaningful balance for weeks at a time, the rate advantage of a secured line compounds and is worth the lien and the reporting. If you expect to touch it four times a year for a fortnight each, the friction costs more than the rate saves.
Two minutes with the desk beats two hours of tabs
Lines are worth opening before you need one. Ten minutes with the desk will tell you what size you'd realistically qualify for today.
Typical credit line size
$10,000 – $250,000
Indicative; final terms depend on lender and profile.
Interest owed on an undrawn line
$0
Indicative; undrawn balances accrue no interest, though some lenders charge a maintenance, draw, or non-use fee.
The cost of a line is a function of days, not of the limit. Draw $20,000 against an illustrative 18% line and repay it in forty-five days, and the interest is roughly $444. Repay it in twenty-one days and it's about $207. Do that four times in a year — $20,000 out, forty-five days each time — and you've paid something like $1,775 for the year, on a facility that stood ready the whole time. That is remarkably cheap access to capital, and it is the entire argument for the product. Compare it against the alternative most owners actually use — a card at a higher rate, or a short-term loan whose fixed schedule keeps debiting long after the need has passed — and the line wins on both cost and shape. The discipline it demands is the price of that advantage.
Now the failure mode. Draw $50,000 at the start of the year and carry it to December, and the same 18% line costs roughly $9,000 — you've turned a flexible facility into a term loan at term-loan-plus pricing, without the fixed schedule that would have forced you to pay it down. This is the most common way lines go wrong: the balance never returns to zero, and what was designed as a bridge quietly becomes permanent debt. Add any maintenance or draw fees your lender charges, and a line used badly is more expensive than the term loan you avoided. The tell is easy to check and uncomfortable to look at: pull twelve months of statements and find the lowest balance the line reached. If that number never touched zero, the facility is financing something structural, and the right conversation is about what, not about raising the limit.
If the gap is a single, dated event rather than a recurring cycle, Working Capital Loans give you the same money with a schedule that forces repayment — sometimes a feature rather than a limitation. If most of your working capital is trapped in unpaid B2B invoices, Invoice Factoring releases it directly and scales with your receivables instead of with a fixed ceiling. And if you've genuinely outgrown a $250,000 limit and have real receivables and inventory behind you, Asset-Based Lending sizes a facility to your balance sheet rather than to your credit score, which is usually the natural next step rather than a different direction entirely.
A line of credit is the most useful facility a business can hold and the easiest to misuse. Held with discipline, it costs a few hundred dollars a year and eliminates the panic that produces expensive decisions. Held without discipline, it becomes an expensive permanent balance you stopped noticing. The single best habit is a simple one: pick a date each quarter when the balance has to reach zero, and if it can't, treat that as information about the business rather than as a reason to raise the limit.
Ask about a line before you need one
Email the desk your revenue and how the swings run through the year — you'll get a realistic limit and structure back.
Only on the drawn balance, and only for the days it's outstanding. The undrawn portion sits available at no interest cost. Some lenders do charge a maintenance or non-use fee to hold the facility open, which is worth asking about directly since it's the one cost that applies whether or not you ever borrow. On a rarely used line, that fee can be your entire annual cost.
Applications typically involve a credit inquiry, and how the facility reports varies by lender — some report to business bureaus, some to personal, some to both. What matters more in practice is utilization over time: a line consistently run near its limit tells any future underwriter that the business is operating without slack, and that reads as risk regardless of whether every payment was made.
Yes, and the combination is often the right structure: the term loan funds the thing you bought, the line covers the timing around it. What underwriters check is total debt service against cash flow, so the second facility is judged on what's left after the first. Where it gets dangerous is using the line to make the term loan's payments, which is the clearest early warning sign a business can generate.
“A line you never draw on is the cheapest insurance a business can buy.”
Find the limit you'd qualify for today
Answer a few questions and see a realistic line size and structure for your revenue and credit profile.