Funding options
Business line of credit
Credit you draw on when the week is short, and repay when the money lands. You pay interest on what you have actually drawn, so a line you have not touched costs little beyond whatever fee the partner charges to keep it open.
About two minutes. No credit pull to start. Free to you. Funding partners pay Addy for the introduction. Not an offer or an approval.
- How it is priced
- Interest on the balance you have drawn, plus any draw or maintenance fee.
- How you repay
- Weekly or monthly payments on the drawn balance. Repay it and the room is there again.
- What owners use it for
- Payroll in a thin week, materials before a job pays, the gap between invoicing and getting paid.
Amounts, rates and terms come from the funding partner and depend on what your file shows. I do not set them, and I cannot promise them.
What it is
The plain version.
A business line of credit is a credit limit you can borrow against more than once. Draw $8,000 this week, repay it over the next two months, and the $8,000 is available again. You are charged interest on what is drawn, not on the whole limit.
It is credit, which means it is underwritten like credit: a partner is deciding whether you will pay it back, and pricing it accordingly. That is also why it is usually cheaper than an advance, and why it is usually harder to arrange early in a business’s life.
Lines are commonly backed by a personal guarantee. If the business does not repay, the owner does. Read that part of any agreement before you sign it.
What a draw costs
- You draw
- $20,000
- Illustrative rate
- 24% a year
- Repaid over
- 6 monthly payments
- Interest paid
- about $1,400
Illustration only, not a quote. I picked the rate to show the arithmetic; a partner sets the real one, and fees can sit on top of it.
The same $20,000 taken as a merchant cash advance at a 1.30 factor rate would mean remitting $26,000 — $6,000 for the money instead of about $1,400. That gap is why I tell owners to try for a line first.
How it works
Four steps, and the one that surprises people is the last.
- 1
A partner sets a limit
The limit and the pricing come out of underwriting: what your deposits look like, how long you have been trading, your credit history.
- 2
You draw what you need
Move part of the limit into your business account. Some lines charge a small fee per draw; the interest starts on what you took.
- 3
You repay on a schedule
Weekly or monthly payments against the drawn balance, for as long as it takes to clear it.
- 4
The room comes back
As the balance falls, the limit frees up again. A line you are not drawing on costs little beyond any fee to keep it open, which is the point of arranging one before you need it.
What partners may read
What a funding partner may look at.
- How long the business has been trading, and whether the deposits go back that far
- Monthly deposits, and how steady they are month to month
- Days the account went negative, and how often payments bounced
- Advances or lines already outstanding, and what they take out each week
- The owner’s personal credit, especially in the first year or two
- The industry, and who actually pays you — customers at the door, insurers, a general contractor
My read of what underwriting tends to weigh, not a list anyone published and not a test I score. Every partner sets its own criteria and none has told me what they are. Partners underwrite and decide; my job is to make the request readable so the answer comes back either way.
When it fits
- Your revenue is uneven week to week and you want something to bridge it
- You have a use for the money that pays for itself, like materials for work already booked
- You have time to go through underwriting rather than needing the money on Friday
- You want the option available before you are desperate for it, which is when it is cheapest to arrange
When it is the wrong tool
- You need to cover a shortfall that is not going to reverse. A line does not fix an unprofitable month; it postpones it
- You are already remitting on an advance and it is tight. Adding a payment makes the week harder, not easier
- The purchase is a truck or a machine with a long life. Equipment financing is usually the cheaper shape for that; say so on the form and the request goes to a partner who does it
Questions
The ones owners actually ask.
Still stuck? The guides go further:
How does a business line of credit work?
A partner sets a limit; you draw part of it into the business account when you need it, pay interest on the drawn balance only, repay on a weekly or monthly schedule, and the room comes back as the balance falls. A line you are not drawing on costs little beyond any fee to keep it open, which is why the time to arrange one is before the week you need it. Put your own draw through the calculator.
Is a line of credit the same as a business loan?
No. A term loan arrives once, as a lump sum you repay on a fixed schedule. A line is a limit you can draw on repeatedly, and you are charged for what you draw. If a lump sum is the shape you need, say so on the form.
Will applying pull my credit?
Not with me. The form on this page is information, not an application, and I do not run credit. A funding partner may run credit as part of its own underwriting, and it will tell you when it does.
How long does it take?
That is the partner’s call, not mine, and it depends on how readable your request is. What I can say is what makes it slower: missing bank statements, no EIN, and deposits a partner cannot match to the business.
What if I am turned down?
Partners decline requests, and I will not pretend otherwise. Usually it comes down to time in business, thin or erratic deposits, or existing debt. Most of those are fixable with a few months of cleaner records.
Do I need an EIN?
Almost always. It is free from the IRS and takes about ten minutes online. I wrote a short guide on getting one.
Get funding options
Tell me about the business.
One form covers every shape on the shelf. Tell me about the business and roughly how much you're after; partners who work with businesses like yours take it from there. About two minutes, no credit pull from me.