A business line of credit works similar to a credit card. The line can be used when needed, and as you pay down your debt, your credit line is replenished up to the original credit limit. The main features that make a small business line of credit attractive are purchase and payment flexibility.
Repayment terms generally fall within a 6-month to 3-year span, and credit limits are typically higher than their credit card counterpart.
Depending on your lender, you may be charged a draw fee on each withdrawal you make, which can cost 1%-2% of the borrowed funds. You may also be charged an annual fee. Withdrawal minimums may also apply. Additionally, if you don’t use your credit line for a period of time, you may be responsible for paying an inactivity fee.