How a line of credit works
A lender approves you for a set credit limit, say $50,000. You draw money from that limit whenever you need it, and you only pay for what you actually take out.
Draw $10,000, and you're charged based on that $10,000, not the full $50,000 limit. As you repay, your available credit opens back up. That's what makes it "revolving": you don't have to reapply every time you need cash again.
Loot's line of credit works this way, with limits from $5,000 to $100,000. The eligibility check is a soft pull, so it never affects your credit score, and there's no minimum credit score required to qualify. Most applicants get a decision in as little as 24 hours, backed by Loot's automated underwriting review, which typically runs in under a minute.
How can you use a line of credit?
A line of credit works as a standing buffer for your business, ready whenever you need it, whether that's covering a cost today or investing in growth next quarter.
How can you cover day-to-day costs?
- Covering payroll during a slow month
- Buying inventory ahead of a busy season
- Bridging the gap while waiting on a slow-paying invoice
- Handling a surprise repair or emergency cost
How can you use it to grow your business?
- Funding a marketing push to bring in new customers
- Jumping on a big order or opportunity now, then drawing again for payroll or expenses a few months later
- Hiring ahead of a busy stretch
- Testing a new product or service before committing bigger capital to it
According to the Federal Reserve's 2026 Small Business Credit Survey, 56% of small businesses that sought financing in the past year did it to cover operating expenses, and 46% did it to pursue an expansion or new opportunity.¹ A line of credit is built to cover both.
Line of credit vs. other financing: quick comparison
| Line of credit | Business credit card | Term loan | |
|---|---|---|---|
| How you get funds | Draw from an approved limit as needed | Charge purchases up to a credit limit | One lump sum, all at once |
| What you pay for | Based on the amount you've drawn | Interest only if you carry a balance | Interest on the full amount from day one |
| Typical limits | $5,000 to $250,000+ | $1,000 to $50,000 | $10,000 to $500,000+ |
| Repayment | Flexible, pay down and draw again | Minimum monthly payment | Fixed schedule until the term ends |
| Best for | Ongoing or unpredictable costs | Small, everyday purchases | One-time, planned expenses |
Secured vs. unsecured lines of credit
A secured line of credit requires collateral, like inventory or equipment, that the lender can claim if you default. An unsecured line of credit doesn't require collateral, though most lenders will still ask for a personal guarantee.
Loot's line of credit is unsecured. You won't need to put up collateral to qualify.
How to qualify for a line of credit
Requirements vary by lender, but most will look at:
- How long you've been in business
- Your annual revenue
- Your business and personal credit history
- Your recent bank statements or cash flow
Loot's minimum requirements:
- At least 1 year in business
- At least $200,000 in annual revenue
- No minimum credit score. Loot underwrites based on your business's cash flow instead
Pros and cons of a line of credit
Pros:
- Draw only what you need
- Pay based on what you use, not the full limit
- Reuse the credit as you repay
- A ready buffer for unplanned costs or your next growth push
Cons:
- Limits usually run smaller than a term loan
- Easy access can tempt over-borrowing without disciplined repayment
- Your limit sets a ceiling, so it may not cover a purchase larger than what you're approved for
Bottom line
A line of credit gives you a flexible pool of capital you can draw from whenever your business needs it, and you only pay for what you use. Put it toward a marketing push to grow today, and it's still there to cover payroll two months from now, it's the same buffer, ready both times.
No minimum credit score, and checking your eligibility won't affect your credit score.
¹ Federal Reserve Banks, 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey, fedsmallbusiness.org
Blackbeard
Senior Content Strategist · Small Business Finance · Loot
Blackbeard writes about cash flow, lending, and financial planning for small business owners, drawing on eight years of covering SMB finance. Blackbeard holds a B.S. in Finance and has contributed to several small-business banking publications.
FAQ
Yes. As you repay what you've drawn, that amount becomes available to borrow again, without a new application.
No. You're only charged based on the amount you've actually drawn, not your total approved limit.
It varies by lender. Many require a minimum FICO score in the 600s; Loot sets no minimum score and underwrites based on your business's cash flow instead.
Speed depends on the lender and your documentation. Loot gives a decision in as little as 24 hours, often backed by an automated review that takes under a minute.
Not with Loot. Checking your eligibility is a soft pull, so it never affects your credit score, whether or not you move forward.
Yes. Most lenders don't restrict how you use the funds, so it works for a one-time purchase, payroll, inventory, or anything else your business needs, as long as it's within your credit limit.
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