Is a Business Line of Credit a Good Idea?

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on December 13, 2022

A business line of credit can be a great idea for business with a need for short-term funding. With a business line of credit, you can borrow up to your credit limit before having to pay down the balance. Business lines of credit are offered both by banks and by alternative lenders.

Is a Business Line of Credit a Good Idea FAQs

What is a line of credit?

A line of credit is money lent to an individual or business. If a line of credit is revolving, then the line of credit will replenish as the borrower pays back money borrowed.

What does LOC stand for?

The acronym LOC stands for Line of Credit.

What is a revolving line of credit?

A revolving line of credit is one which replenishes when the loan is paid off. An example of this is a credit card. A non-revolving line of credit closes once the loan is paid off, such as a student loan.

What's the difference between a line of credit and a loan?

A loan is typically a lump sum whereas a line of credit is typically revolving which allows for the borrower to draw, repay, and again draw as needed.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

Find Advisor Near You