Draw only what you need
Business line of credit
A pre-approved limit you draw from when you need it. You pay interest on what you have drawn, not on the limit sitting there.
Business Line of Credit at a glance
- Amount
- $2,000 to $100,000 limit
- Term
- Ongoing facility, reviewed periodically
- Security
- Usually unsecured. A personal guarantee from the directors is standard.
- Time to funding
- Setting the limit up takes the longest. After that, drawdowns are quick.
- Typical use
- Seasonal stock, payroll in a quiet month, bridging a 60-day invoice, an opportunity you cannot plan for
- What you'll need
- Your NZBN or company number or trading details, photo ID, and recent business bank statements
What it is
What is a business line of credit?
A business line of credit, sometimes called a revolving credit facility, is a limit rather than a lump sum. The lender approves a ceiling, say $20,000, and you draw against it whenever you need cash. Interest is charged only on the balance you have drawn. Repay it and the limit is available again, without reapplying.
That structure suits a specific problem: money going out before money comes in. Seasonal stock, a slow-paying main contractor, wages in a quiet month. It is a poor fit for a large one-off purchase, because a term loan will usually price that more cheaply. Some facilities carry a fee whether you draw or not, so an unused line is not always free. Price it like insurance.
Worked example
Three months on a $20,000 limit
- A landscaping business in Christchurch sets up a $20,000 limit and draws nothing on day one.
- Month 1: draws $8,000 for plants and materials on a school contract. Interest is charged on $8,000, not on $20,000.
- Month 2: draws another $4,000 for plant hire and casual labour. The drawn balance is $12,000, so interest is charged on $12,000. The remaining $8,000 of the limit costs no interest at all.
- Month 3: the school pays at the start of the month. The business repays $10,000, leaving $2,000 drawn, and interest for that month is charged on $2,000.
The same $12,000 borrowed as a 12-month term loan would have accrued interest on the full amount for the full year, whether the school had paid or not.
Is this right for you?
Is a business line of credit right for you?
Good fit if…
- Your cash gaps are real but you cannot say in advance how big or when.
- You invoice on 30 or 60 day terms and get paid later than that.
- You buy stock seasonally and sell it down over the following quarter.
- You have a trading history with steady deposits in your account.
- You will repay drawings as the cash comes in, rather than letting the balance sit at the limit.
Probably not if…
- You need more than $100,000. An unsecured term loan reaches much higher.
- You know exactly what you need and when. A term loan will usually price that more cheaply.
- You would sit at the limit permanently. At that point you are paying revolving pricing for term debt.
- You are buying an asset. Asset or vehicle finance uses the asset as security and usually costs less.
- A fee on an unused facility would annoy you more than the flexibility is worth.
What it costs
What a business line of credit costs
A line of credit has more moving parts than a term loan. Price all of them, not just the rate.
- Interest rate
- Rates are set by the lender for your deal, not by us, and depend on your trading, your credit file and the product. On a line of credit it is charged on the drawn balance only, and it is often quoted per month rather than per year, so multiply it out before you compare.
- Arrangement fee
- Some lenders charge once when the limit is set up, and some charge a fee on each drawdown.
- Ongoing fees
- A monthly or annual facility fee is common and may be payable whether you draw or not.
- Paying it out early
- Repaying a drawn balance early is normally free and is exactly how the product is meant to be used. Closing the facility itself may attract a minimum term or an exit fee.
Bizzloans is a commercial finance broker, not a lender. The lender that funds your deal pays us a commission, which we disclose to you. You pay us nothing to compare.
Eligibility
Who can apply
- A New Zealand business: limited company, sole trader, partnership or trust
- Photo ID (passport or NZ driver licence) for each director, partner, trustee or owner
- In business for at least 6 months
- Turnover of at least $6,000 a month
- Bad credit considered
- Line-of-credit lenders often want a longer trading history than a term loan
Don’t meet these? Talk to us. We have lenders for most situations, and we’ll tell you straight if we don’t.
Contact usWhat you'll need
What you’ll need
No documents
To get a quote
- Nothing. Tell us the limit you want and roughly what your monthly turnover looks like.
- No credit file is pulled to compare, so looking does not mark your file.
Once you pick a lender
To settle
- Recent business bank statements, as PDFs or through secure bank statement retrieval
- Your NZBN or company number, and photo ID and proof of address for each director
- An aged debtors report, if you invoice on terms
- Your most recent GST return, if the lender asks for it
- The facility agreement, personal guarantee and direct debit authority
How it works
How it works
A few minutes
Set the limit, not the loan
Tell us the ceiling you want available and what the gaps usually look like. Asking for more than you can afford does not help: the assessment is the same as a term loan.
Once your details are in
We match you to a revolving lender
Fewer lenders write genuine revolving facilities than write term loans, and their trading-history rules are stricter. We go to the ones whose criteria you fit.
Facility live, draw when you need it
Once the facility is open you request a drawdown online and the money moves to your business account. Repay and the limit refills.
This vs the alternative
Line of credit vs unsecured term loan
Same lenders, same guarantees, completely different cost profile. The question is whether you can name the amount today.
| Business line of credit | Unsecured term loan | |
|---|---|---|
| How you get the money | A limit you draw from as needed | One lump sum at settlement |
| What you pay interest on | Only the drawn balance | The full amount, from day one |
| Cost when you are not using it | Any facility fee only | Full repayments continue regardless |
| Re-usable | Yes, up to the limit, without reapplying | No. Repay it and apply again. |
| Amount | $2,000 to $100,000 | Up to $500,000 |
| Best for | Unpredictable, repeating cash gaps | A single named purchase or bill |
Running both is common and often sensible: a term loan for the fit-out, a line for the gaps. Just make sure the combined monthly outgoing still works in a slow month.
Three habits that keep a line of credit cheap
- Draw late and repay early. Interest accrues on the days the balance is out, so a drawdown timed to the supplier's due date costs less than one taken a fortnight ahead.
- Sweep it. When a big invoice is paid, put it straight against the drawn balance instead of letting it sit in your current account.
- Review the limit regularly. If your turnover has grown, renegotiate the limit rather than topping it up with a second facility on worse terms.
FAQ
Business Line of Credit questions
How is this different from a business overdraft?
Do I pay anything if I never draw on it?
How quickly do drawdowns reach my account?
Can the lender reduce or cancel my limit?
Is a line of credit secured?
Can I use it to pay IRD?
What happens if I sit at the limit for months?
Why is the limit capped at $100,000?
How is interest calculated?
A person reads this, not a scoring engine
A named advisor takes your file to the lenders on the panel that fund your industry and your turnover, and tells you plainly when a business line of credit is the wrong answer and what to use instead.
Ready when you are
Compare Business Line of Credit today
Comparing is free, you’re never locked in, and checking won’t affect your credit score. If we can’t help, we’ll tell you that too.
