A small business can get a business line of credit, which is one of the most useful and dependable ways to get money. It lets you get working capital exactly when you need it, without having to take out a long-term loan or pay interest on a lump sum you don’t need.

But a lot of business owners still don’t know how a line of credit works, how to pay it back, how to make draws, how to figure out interest, and what lenders look for before giving you one.

This guide makes everything obvious and easy to understand, so you’ll know exactly how a business line of credit works, how to use it wisely, and how ICG Funding can help you get approved, even if a bank has already turned you down.

When you’re done reading, you’ll know:

• What is a business line of credit?
  
• How the cycle of drawing and repaying works
  
• What sets a LOC apart from a credit card or loan
  
• How payments, interest, and renewals work
  
• How revolving credit really works
  
• What lenders look at before giving you money
  
• How to figure out LOC limits
  
• How to get a business line of credit from ICG Funding
  

Let’s go over it step by step.

What a Business Line of Credit Really Is

A business line of credit (BLOC) is a type of credit that lets your business borrow money whenever it needs it, up to a limit that has already been set.

You could think of it as a cash-on-demand tool.

You take money out when you need it.
You pay back what you borrow.
The credit is available again.
You do this cycle over and over as needed.

It’s like having a safety net that makes your business more flexible, able to deal with problems, and able to take advantage of chances.

How to Use a Business Line of Credit (Step by Step)

This is the easiest and clearest way to explain how a LOC works:

1. You have been given a credit limit.
   For example, a line of credit for $40,000.
   
2. You take out money when you need it.
   Let’s say you use $12,000 for payroll or inventory.
   
3. You only have to pay interest on the amount you take out.
   Not the whole $40,000, just the $12,000 you spent.
   
4. You pay back the money you borrowed over time.
   Depending on the lender, this could be once a week, once a month, or twice a month.
   
5. Your line automatically fills up again.
   Once you pay back the $12,000, the whole $40,000 is available again.
   

This ability to get cash whenever you need it is what makes a LOC so much better than a regular loan.

What Sets a LOC Apart from a Regular Loan

Many business owners believe that a line of credit is the same as a term loan, but the two are very different.

In simple terms, here’s the difference:

A Loan for Your Business:

• Gives you a set amount
  
• You pay interest on the whole amount
  
• Payments are set
  
• Use is usually for a longer time
  
• Best for big purchases or growth
  

A Line of Credit for Business:

• You can take money out at any time
  
• You only have to pay interest on what you take out
  
• Access comes back as you pay back
  
• Best for short-term cash needs
  
• Works like a backup for money
  

A loan is a promise.
A line of credit gives you options.

Why a Business Line of Credit Is So Important

Every business, even the strongest ones, has problems with cash flow that come up out of the blue. A line of credit is a safety net that keeps things running smoothly during:

• Slowdowns in the winter
  
• Delays in customer payments
  
• Unexpected costs
  
• Fixes for equipment
  
• Not enough stock
  
• Situations that require immediate action
  

And on the bright side, a LOC lets you say “yes” to chances:

• Discounts on flash inventory
  
• Bringing on new clients
  
• Job openings
  
• Pushes in marketing
  

This is why almost every business that is financially stable has a line of credit: not because they need it right now, but because they will need it at some point.

Learning About the Revolving Credit Cycle

A LOC is like a credit card, but it gives you cash, higher limits, and usually better terms.

This is how the revolving cycle works:

1. Draw, use, pay back, and use again.
   The limit starts over every time you pay back what you owe.
   
2. You can keep using it for as long as you want.
   You can keep using the line as long as you keep the account in good standing:
   
   • Years
     
   • Several business cycles
     
   • Changes in the seasons
     A lot of businesses use their LOC for five to ten years or even longer.
     
3. Interest Only Applies to Money You Borrow
   This is the best thing about it compared to a business loan.
   

How Interest Works on a Business Credit Line

Interest on a LOC is very different from interest on a regular loan.

This is what you need to know:

• Interest only applies to the amount you draw, not the whole limit.
  If your limit is $50,000 but you only take out $8,000, you only pay interest on that amount.
  
• The type of lender and the level of risk affect interest rates.
  Normal ranges:
  
  • Bank LOCs: 8 to 14%
    
  • Online LOCs: 12–25%
    
  • LOCs for high-risk or new businesses: 20–35%
    
• You may have to pay interest once a week or once a month.
  Some lenders use simple interest, while others use amortized structures.
  
• Paying back quickly can help you save money on interest.
  You only have to pay interest on the money you owe, so the faster you pay off your draw, the less the LOC costs.
  

How the System Works: Draws, Payments, and Renewals

A lot of business owners ask:

“How do payments work on a LOC?”

Here’s how it breaks down:

Draws

You can pull out as much as you want whenever you want.
You don’t have to draw, unlike some loans.

Payback

You can pay back:

• Every week
  
• Every two weeks
  
• Every month
  

Online lenders often let you pay once a week because it’s easier to keep track of your money that way.

Renewal

Most lines are renewed every six or twelve months.

Most of the time, renewals are based on:

• New bank statements
  
• Trends in income
  
• History of payments
  
• Changes to your credit score
  

Over time, a well-managed LOC can raise your limits.

How Lenders Decide How Much Credit You Can Get

Your business’s cash flow, not just your credit score, determines your credit limit.

What lenders look at:

• Monthly income
  
• Average daily balance in the bank
  
• How often you deposit
  
• History of overdrafts
  
• Time spent in business
  
• Debts that need to be paid
  
• Level of risk in the industry
  

A business that makes $35,000 a month and has clean statements may be able to get a line of credit (LOC) for $20,000 to $40,000.

If a business makes $80,000 a month, it could get $50,000 to $100,000 or more.

What Lenders Look At Before They Say Yes to You

Lenders look at four main things:

1. Health of Bank Statement

This is the most important thing for modern underwriting.
They look at:

• Ending trends in daily balances
  
• Number of NSFs
  
• Number of overdrafts
  
• Consistency in deposits
  
• Patterns of cash flow
  

If your bank activity is strong and predictable, you have a better chance of getting approved.

2. Stable Income

Lenders like:

• Regular deposits
  
• Income that comes in regularly
  
• Sales that stay the same every month
  

A business that makes $18,000 a month is better than one that makes $35,000 one month and $5,000 the next.

3. Debt That Is Already There

If you have:

• MCA advances
  
• High ratios of repayment
  
• Several loans stacked on top of each other
  

Your amount could go down.

Some lenders won’t give you a new line of credit if your debt service is more than 40–45% of your income.

4. Score of Credit

Your credit score has an effect on:

• Your terms
  
• If collateral is needed
  
• If you get an unsecured LOC
  

But cash flow is more important than that.

How Secured and Unsecured Lines of Credit Work

There are two main kinds:

Secured LOC

Collateral is needed, such as inventory, equipment, or real estate.

Pros:

• Better prices
  
• More limits
  
• Easier to get approved
  

Disadvantages:

• More paperwork
  
• Longer underwriting
  

LOC Without Collateral

No collateral is needed.

Pros:

• Quick approval
  
• Less paperwork
  
• Good for small businesses
  

Cons:

• A little bit more interest
  
• Less strict initial limits
  

Depending on their financial situation and goals, ICG Funding can help businesses get both types.

When to Get a Business Line of Credit

A LOC is best for needs that come up often or for a short time.

Smart Uses:

• Paychecks
  
• Stock
  
• Marketing
  
• Fixes
  
• Costs in case of an emergency
  
• Payments to contractors
  
• Covering times when things are slow
  

Not Smart Uses:

• Debt that lasts a long time
  
• Buying big pieces of equipment
  
• Financing a car
  
• Paying off large MCA balances without a plan
  

A LOC is not the same as structured long-term financing.

How to Raise Your LOC Limit Over Time

If you do the following, lenders will raise your credit line:

• Make sure your average daily balance stays healthy
  
• Don’t go overdrawn or NSF
  
• Show steady income
  
• Use your LOC wisely and pay it back
  
• Request regular limit increases
  
• Work with a broker like ICG Funding, who can talk to more than one lender about getting higher limits

How ICG Funding Helps You Get Your Loan Approved

Most of the time, banks turn down applications for lines of credit, especially for small businesses.

ICG Funding raises your chances of getting approved by:

• Working with more than one lender
  
• Finding the right underwriting criteria for you
  
• Helping businesses with bad credit
  
• Getting higher limits
  
• Getting approvals faster
  
• Lowering fees
  
• Steering clear of predatory lenders
  

Most businesses can get approval in 24 to 72 hours, depending on their statements and income.

How to Get a Line of Credit from ICG Funding

It’s easy to apply:

Step 1: Send in your application
Step 2: Send in bank statements for your business for the last 3 to 6 months
Step 3: Look at offers from more than one lender
Step 4: Pick the terms you like best
Step 5: Get money

Most approvals happen in one to three business days.

Last Thoughts

One of the best and most flexible ways for your business to get money is through a business line of credit. It keeps your cash flow steady, lets you take advantage of growth opportunities, and lets you work without stress.

Knowing how a LOC works will help you with your money, and ICG Funding makes it easy and quick to get approved.