What Is a Revolving Line of Credit?

A revolving line of credit gives brands access to continuous capital that can be accessed to pay for everyday business expenses. Similar to a credit card, funds can be used and paid off without having to reapply, and credit scores and income are a few factors that determine the limit for your line of credit.

We’ve outlined how revolving lines of credit work, what the differences between secured and unsecured credit lines are, and we’ll also provide information on how your brand can get access to a revolving line of credit.

How Does a Revolving Line of Credit Work?

Revolving lines of credit are similar to credit cards. The borrower is approved for a pre-set limit that is dependent on their income and credit history. Unlike a non-revolving loan, where the entire sum is paid out to the borrower, the funds from a revolving line can be used whenever the need arises as long as the remaining limit has not been reached. After a payment is made, that amount becomes available again for use. It is also important to keep in mind that no interest is charged until the line is tapped for funds.

What Are Some Examples of Revolving Lines of Credit?

A business credit card is one example of a revolving line of credit, such as the Chase credit card for business, but they do not always include a physical card. You might be familiar with the popular HELOC (home equity line of credit) that allows a homeowner to secure a line of credit against the equity in their home. An Assembled Brands revolving line of credit is similar but you can use your business’s lendable assets instead of your personal home which allows for much higher lines of credit (up to 15 million).

The Difference between Secured and Unsecured Lines of Credit

Secured lines of credit are backed by collateral or assets that belong to the business like inventory, machinery and other property. This allows lenders to offer lower interest rates and larger amounts on secured lines of credit than unsecured ones.

Unsecured lines of credit do not require any collateral as a guarantee and thus undergo stricter application requirements and have higher interest rates.

Why Choose a Revolving Line of Credit

A good reason for choosing a revolving line of credit is being able to quickly draw money to make purchases if there’s limited or no cash at hand. A credit line can be tapped whenever the need arises, and businesses can rest assured that they’ll have the necessary funds available at the right time.

Once approved, there is no need to reapply in order to draw more funds within the capacity of the line. Another good reason to choose a revolving line of credit is that interest is only paid on the amount drawn, rather than the entire credit line.

How to Get a Revolving Line of Credit

Revolving lines of credit can provide your business with the necessary funds to accelerate your brand’s growth. Applying for a revolving line of credit is simple and can be done within minutes.