A business line of credit gives a company access to funds up to a set limit; it draws what it needs, pays interest on the drawn balance, and on a revolving line can draw again as it repays. Rowanglen Business Loans, a small-business funding broker in Pocatello, ID, explains draws, payments and line types and introduces requests to lending partners.
| Built for | Repeating costs that vary in size and timing |
|---|---|
| Drawing | Request funds up to the limit as needs arise |
| Interest | Charged on the drawn balance, not on the unused limit |
| Two kinds | Revolving: repayments free up the limit again. Non-revolving: they do not |
| Who decides | The partner sets the limit, rate, fees and review dates |
| Office | 771 Yellowstone Ave, Pocatello, ID 83201 · (208) 439-0428 |
Making a draw
A draw is a request to move money from the line into your business account. Depending on the partner, you make it online, by phone or with a written draw request, and some lines link to a business checking account so that a draw happens automatically when a payment would overdraw it. Some partners set a minimum draw amount or charge a fee per draw, so check how drawing works before you rely on the line for a payroll date.
Revolving and non-revolving lines
On a revolving line, every dollar you repay becomes available to draw again, for as long as the line stays open and in good standing. On a non-revolving line, you can draw up to the limit, but repayments reduce the balance without reopening the limit; once the full amount has been drawn, the line is used up. Non-revolving lines are sometimes used for a project that will be paid in stages, such as a build-out with several invoices.
How payments and interest are calculated
Interest accrues on the outstanding balance, usually daily, and is billed monthly or more often. The required payment may be interest only for a period, a percentage of the balance, or a fixed amount that repays each draw over a set number of weeks or months. Two lines with the same rate can produce very different payments, so ask how the minimum payment is worked out and run an example. Annual or maintenance fees, draw fees and charges for an unused limit can add to the cost even in months you draw nothing.
A draw traced through, with invented figures
Suppose, purely as arithmetic, a revolving line has a $50,000 limit and the owner draws $12,000 to buy materials for two jobs. Interest accrues on the $12,000 only. When both jobs pay and the owner repays the $12,000, the full $50,000 limit can be drawn again. On a non-revolving line with the same limit, that repayment would cut the balance to zero but leave just $38,000 of the original limit still to draw. These numbers illustrate the mechanics, not an offer.
Secured or unsecured
A secured line is backed by named collateral, often receivables or inventory, and may be sized against them. An unsecured line names no specific asset, but usually carries a personal guarantee and may still include a general lien on business assets. Lines are commonly reviewed every year, and a partner can reduce or close a line after a review, so a line is not a permanent source of money.
A line of credit or a term loan?
Use a line for costs that repeat in uneven amounts: materials for overlapping jobs, stock between deliveries, a slow-paying account. Use a term loan for a single, known cost such as a remodel. Drawing a line to the limit for a long-term purpose and leaving it there tends to cost more than a term loan and leaves no room for the short-term needs the line was meant for. A single short gap may also suit working capital financing.
What partners watch on an open line
Partners watch how a line is used. Paying the balance down regularly shows the line is doing its job; a balance that never falls suggests the business needs a longer-term structure. Expect to send updated bank statements or financial statements at review time, and tell the partner early if something has changed. For context on the county's business base, see Bannock County business figures, and for every option, the comparison table. How a request moves explains the steps, and sector notes are under the industry pages.
By Rowanglen Business Loans · Updated