Revolving credit can be helpful for small business owners who want flexibility without the stress of reapplying for loans every time cash runs low.
Here’s how revolving credit works — and how to use it wisely to help strengthen your financial foundation.
What is revolving credit?
Revolving credit is a flexible borrowing arrangement where you can access funds up to a predetermined credit limit, repay what you've borrowed, and then borrow again as needed.
Unlike installment loans that give you a lump sum when you borrow, revolving credit acts almost like a financial safety net you can tap repeatedly as long as the account remains open, in good standing, and is in a draw period. (More on that in a moment.)
Think of it like a checking account with overdraft protection. You borrow money when you need it, pay it back, and credit is then available for future use.
The two most popular types of revolving lines of credit are business lines of credit (LOCs), and business credit cards.
Fifty-eight percent of small business owners surveyed by the Federal Reserve reported that they regularly use a credit card, while 34% report regularly using a line of credit, according to the 2025 Report on Employer Firms.
How revolving credit works
If you want access to a business line of credit, the basic process will usually look like this:
Step 1: Apply for a line of credit
You may apply through a bank, online lender, or a small business credit card issuer. We will discuss qualification requirements and how to find lenders in a moment.
Step 2: Get approved with a credit limit
If your application is approved, your lender will give you a line of credit with a specific credit limit. You can borrow up to that amount.
An exception: some business credit cards have flexible spending limits rather than a set credit limit.
Step 3: Draw funds as needed
You will be able to access funds (called a “draw”) with a transfer to your business bank account, or by using a card the lender provides, much like a credit card. Some lenders offer both options.
Note that some lenders require a draw fee every time you access new funds. Others may require monthly or annual maintenance fees. These costs can add up, so make sure you understand what will be charged.
Step 4: Make payments
Payment terms vary depending on your line of credit. Open-end lines of credit essentially means that credit is available as long as the account remains open. They can be structured in a variety of ways:
Installment payments
Some LOCs are set up almost like a hybrid between a line of credit and term loans. You take a draw for the amount you need, but you repay that debt like an installment loan with regular payments over a period of two to twenty-four months.
Short-term payments
Some lenders let you borrow funds for a very short period of time, say one to three months, for example. You’ll have to repay the entire amount during that time frame but minimum payments may not be required.
Weekly payments
Some LOCs require weekly payments until the outstanding amount is repaid which may impact cash flow.
Interest-only payments
Some lines of credit are considered “closed-end” lines of credit that only give you access to funds for a specific period of time, usually called the draw period. Interest-only or minimum payments may be required during that time.
After the draw period ends, the balance goes into a repayment period where you will pay back the amount owed over a specific time period. No additional withdrawals can be made at that time.
Step 5: Borrow again
You may be able to “go back to the well” again to borrow more as long as your account remains open and in good standing with the lender. Some lenders may review your account periodically, and may close it if your business looks risky or if you miss payments.
Keep in mind that some lenders operate differently.
Revolving credit vs. installment loans
Factor | Revolving credit | Installment loans |
Access to funds | Ongoing, up to credit limit | One-time lump sum, new loan required to borrow more |
Payments | May vary based on balance. Interest-only, fixed payments, or weekly payments may be options | Fixed monthly payments over set period of time most common |
Interest | Only charged when borrowed | On full loan amount until repaid |
Repayment | Usually short term, but payment terms can vary | Fixed term (2–25 years) |
Often best used for | Cash flow, short-term expenses, working capital, unexpected costs | Large purchases, expansion |
Compare revolving lines of credit for business
The best revolving line of credit for your business is the one you qualify for, and that offers terms that match your business needs. That in mind, here are some popular options, including those from Nav partners. Nav does not make credit offers directly. Offers shown are from lenders and are subject to approval.
You may also want to check with your local bank or credit union, and some SBA loans offer lines of credit too.
Line of Credit by Fundbox
Nav recommends this product as a great solution for newer small businesses looking for a fast application process and access to a flexible LOC product. Bonus: When you click 'Apply now," we'll securely pass over your info, making applying with Fundbox a breeze. Only answer a few additional questions on their end and you're good to go.
Pros
- 625 minimum personal credit score
- No impact to credit score to apply (soft pull only)
- No draw fees
- Fast approval and funding, with funds available as soon as the next business day
- Use as much as you need, only pay interest on what you use
- Fundbox reports payment activity to all the major commercial credit bureaus via the Small Business Financial Exchange (SBFE), which can help strengthen a business's credit profile.
Cons
- Must have a business checking account with a minimum balance of $500
- May require large weekly payments (0.4% - 0.7% of the original draw amount per week) due to the short repayment duration.
Funding Amount
Cost
Repayment Terms
Funding Speed
Line of Credit by Headway Capital
Headway Capital provides businesses with a true revolving Line of Credit with no pre-payment penalties, one fixed monthly payment, and the ability to access additional capital any time you have funds available. Bonus: When you click 'Apply now," we'll securely pass over your info, making applying with Headway a breeze. Only answer a few additional questions on their end and you're good to go.
Pros
- Pre-approval process does not require hard personal credit inquiry
- Approval within hours of applying
- Only pay interest on what you use
- Offers 24-month repayment terms and monthly payments.
Cons
- Interest rates can be higher than some other line of credit providers
- Hard personal credit inquiry at the time of funding.
Funding Amount
Cost
Repayment Terms
Funding Speed
Line of Credit by OnDeck
Monthly Payments and extended repayment terms (18 and 24 month terms) available. A line of credit can be a great asset to businesses who need capital on hand- fast. It allows you the flexibility to draw funds when you need it, and you only pay interest on what you use. Once approved, you can draw available funds quickly and easily without having to provide additional documentation.
Pros
- No monthly maintenance fees
- Monthly Payments available and Extended Repayment Terms (12, 18 and 24 months) Minimal paperwork
- As soon as same-day approval and funding sent by next business day
- Transparent pricing
- Use as much as you need, only pay interest on what you use
- Access available funds with one click.
Cons
- Not available in all states.
Funding Amount
Cost
Repayment Terms
Funding Speed
Line of Credit by Plexe
Line of credit product with weekly repayment options. Funding amounts can range from $10K- $250K, with weekly repayment durations spanning from 10 weeks to 12 months. Not all industries are eligible.
Pros
- Choose either a weekly payment, or a % of monthly revenue in the event cashflow is going to be low in the coming months
- Switch between fixed or percentage-based repayments at any time during mid-payback
- Only one payment for multiple draws. Consolidate all previous withdrawals into one manageable schedule
Cons
- Not available in Nevada, North Dakota, South Dakota, Tennessee, Puerto Rico, Hawaii, New York, and California
- Must have $360K in annual revenue to qualify
Funding Amount
Cost
Repayment Terms
Funding Speed
Line of Credit by Rapid Finance
A Line of Credit through Rapid Finance can be a great way to get flexible access to capital right when you need it.
Pros
- Fast approvals for qualified applicants with the initial draw wired as quick as the same day. No competitor payoffs required Minimal documentation required for approval Use as much as you need, only pay fees on what you draw Online customer portal to make draws and access account information
Cons
- Not ideal for startups or low monthly revenue businesses Requires an established business bank account
Funding Amount
Cost
Repayment Terms
Funding Speed
Line of Credit by SBG Funding
With a quick and easy application, you get fast access to your approved credit line to expand your business. Draw funds as needed with this revolving line of credit.
Pros
- Great for fast access to cash, once approved.
Cons
- Not ideal for startups or lower monthly revenue businesses with no business bank account.
Funding Amount
Cost
Repayment Terms
Funding Speed
Line of Credit by SmartBiz
Must have at least 2 years time in business, 660 minimum FICO score needed. Monthly payment options available at fixed interest.
Pros
- Funding amounts up to $150k per line. Transparent monthly payment schedule. No fees for subsequent draws.
Cons
- Minimum FICO of 660 required. Max NSF’s is 1 in 6 months. 6% origination fee (based on approve line $ amount).
Funding Amount
Cost
Repayment Terms
Funding Speed
Line of Credit or Term Loan by Quantum LS
Great for larger purchases or business expansion
Pros
- Competitive term loan offering for established businesses
Cons
- Some products offer faster funding speeds
Funding Amount
Cost
Repayment Terms
Funding Speed
Common types of revolving credit
These are the main types of revolving credit used by small businesses:
Business credit cards
The most familiar form of revolving credit, business credit cards feature an underlying line of credit that may be used to pay for purchases over time and make minimum payments when cash flow is tight.
They often can help build a business credit history, as most card issuers report to business credit bureaus, either directly or through the Small Business Financial Exchange (SBFE).
The main drawbacks are:
- A personal guarantee is almost always required.
- Interest rates can be high, although some 0% intro APR business credit cards may offer interest-free financing for a year or more on qualified purchases.
Business lines of credit
Business lines of credit may offer higher credit limits than credit cards. They can be helpful for financing larger expenses over a short period of time, inventory purchases, or for bridging cash flow gaps.
Personal credit cards
Though not designed for business use, personal credit cards may help you bridge personal cash flow gaps when you’re not able to bring in enough income from your business. Mixing personal and business finances creates accounting headaches and potential liability issues, though, so be careful about using a personal card for business.
Home equity line of credit (HELOC)
You may be able to use your home as collateral for lower rates, but it puts your personal residence at risk for business debt.
Read: Should you finance your business with home equity?
Pros and cons of revolving credit
Pros
- Pay interest only on funds you use
- Flexible repayment schedule
- Ongoing access without reapplying
- Can help build business credit history
- Quick access to cash for opportunities
Cons
- Variable interest rates can increase costs
- Some LOCs require weekly payments or have very short repayment periods
- May charge a draw fee each time you access credit
- Credit limits can be reduced during economic downturns
- Easy access can also lead to accumulating debt over time
How to qualify for a business revolving line of credit
Each lender is different, but there are some common requirements for many business lines of credit. These include:
- In business for at least six months to a year or more
- Minimum annual revenue: often $5,000/month or $100,000+ annual revenue
- Good personal credit score (typically 650+)
- Separate business bank account
- Business registration and tax ID
Business credit cards often require good personal credit scores (650+) and sufficient income from all sources, not just the business. Most do not have a time in business requirement, making them a solid choice for startups or businesses without a lot of revenue.
How revolving credit affects credit scores
Most business loans and lines of credit don’t affect your personal credit unless you default. Some lenders report payment data to business credit bureaus, which may help build your business credit profile.
To make the most of this opportunity, keep the following in mind:
Payment history is key
Late payments can hurt your business credit scores across all major bureaus including your businesses’ Dun & Bradstreet PAYDEX® Score, Experian Intelliscore PlusSM, and Equifax Business Delinquency ScoreTM.
Credit utilization may count
Some business credit scoring models (though not all) consider credit utilization. This formula compares your balance to your credit limit. For example, a balance of $200 on an account with a $1000 credit limit represents 20% utilization.
Some experts advise trying to keep your balances below roughly 30% of your credit limit to avoid high utilization that can lower your scores. While there’s no universal rule for business credit, in general, keeping balances low compared to your limit may help your business credit scores.
Credit mix may help
Having a mix of different types of credit accounts (both revolving credit and installment loans) may strengthen your credit profile, though payment history remains the top factor.
Try not to wait until the last minute
Many business owners have found it helpful to secure revolving credit before emergencies hit. When cash flow problems strike, you may have limited time to shop around.
The same thing goes when a time-sensitive opportunity arises. Having credit lines already established can mean better rates and immediate access to funds.
You can take time to compare options, negotiate terms, and build relationships with lenders when you're not under financial pressure.
Nav can help. Save time researching and access your best lending options from Nav’s portfolio of 25+ trusted partners.
Frequently asked questions
This article was originally written on May 7, 2025 and updated on October 30, 2025.
Rate this article
This article currently has 5 ratings with an average of 5 stars.
Gerri Detweiler
Education Consultant, Nav
Gerri Detweiler, a financing and credit expert, has been featured in 4,500+ news stories and answered 10,000+ credit and lending questions online. In addition to Nav, her articles have appeared on Forbes, MarketWatch, and Startup Nation. She is the author or co-author of six books, including Finance Your Own Business, and she has also testified before Congress on consumer credit legislation.