A business line of credit is a credit limit a business draws on as costs arise, paying interest only on the amount drawn; on a revolving line, repaid amounts can be drawn again. Glenford Financial, a small-business funding broker in San Angelo, TX, helps Tom Green County owners judge whether a line fits and connects them with lending partners, which decide and set rates and terms.
| Built for | Recurring costs of varying size |
|---|---|
| Funds | Drawn as needed, up to the limit |
| Interest | Charged on the drawn balance, as the agreement sets out |
| Repayment | Payments on the balance; revolving lines free up repaid room |
| Who decides | The lending partner sets the limit, rate and terms |
| Office | 15 W Beauregard Ave, San Angelo, TX 76903 · (325) 241-0824 |
Limit, draw and balance
The partner approves a credit limit. You draw against it when a cost comes up, the drawn amount becomes your balance, and you make payments on that balance. On a revolving line, paying the balance down frees that room to be drawn again, much like a credit card but usually with larger limits and a planned repayment structure. The limit, the interest rate and any other charges are set by the lending partner.
A line is a standing arrangement rather than a single transaction. That is its advantage when costs are irregular, and its risk when it quietly becomes permanent debt.
Drawing on the line: what it means
To draw is to take money from the line. Depending on the partner, a draw may be a transfer to your business checking account through an online portal, a request to the lender, or a check or card tied to the line. Each draw adds to the balance. Some agreements set a minimum draw size or limit how often you can draw, so ask before relying on the line for small, frequent costs.
Draw periods and repayment periods
The draw period is the window during which you can take money out. Some lines revolve indefinitely, subject to periodic review. Others have a fixed draw period, followed by a repayment period in which no new draws are allowed and the balance is paid down on a schedule. Know which kind you have, and note the review or renewal date, because a lender can decline to renew.
Interest on a business line of credit
Interest is generally charged only on the amount drawn, not on the whole limit, and is commonly calculated on the daily outstanding balance. Some lines also carry charges unrelated to the balance, such as a charge per draw or a periodic maintenance charge; the agreement lists them. To compare lines fairly, estimate what you would actually draw over a year and add up interest and every other charge on that pattern.
Two choices: revolving or not, secured or not
A revolving line can be reused as it is repaid. A non-revolving line works more like a loan you take in stages: once drawn and repaid, that room is gone. Separately, a line may be secured by receivables, inventory or a general lien on business assets, or unsecured, in which case partners often ask owners for a personal guarantee. A secured line usually means a UCC filing with the Texas Secretary of State; the Texas UCC guide explains how to see what is already filed.
Payroll and uneven months on a line
Yes, and covering payroll while invoices are outstanding is one of the main reasons businesses keep a line. The discipline is in the repayment: draw for payroll, then pay the balance down when the customer's payment arrives. If the balance only ever rises, the line is funding a loss rather than a timing gap, and that is worth facing early. Restaurants and other businesses whose sales move week to week use lines the same way; in 2023 Tom Green County had 323 employer establishments in accommodation and food services employing 5,880 people (U.S. Census Bureau, County Business Patterns 2023).
For a single gap of known size, working capital financing may be simpler. For stock bought ahead of sales, compare inventory financing.
Line or term loan: which fits
| Line of credit | Term loan | |
|---|---|---|
| Money arrives | As you draw it | All at once |
| Interest on | The drawn balance | The full amount from day one |
| Suited to | Recurring, uneven costs | A single project at a set price |
| Main risk | A balance that never comes down | Paying for money the project did not need |
For a one-time project, see business term loans.
What partners review, and Glenford Financial's part
Partners usually look at bank statements and revenue consistency, existing debts, credit history, time in business and, for secured lines, the collateral. We help you describe the pattern of costs the line would cover and send the request to partners that offer lines. See how a request moves.
By Glenford Financial · Updated