How a line of credit works
A line of credit is an approved limit you can draw against whenever you need it, repay, and draw again without reapplying each time. Unlike an overdraft it sits separately from your trading account, so drawing is a deliberate act rather than something that happens by itself when the balance runs down.
You're charged interest only on the drawn balance. The limit stays available for as long as the facility runs, which for most businesses is the point: the facility is approved before the need arrives, so when the opportunity or the shortfall turns up, the money is already there.
Typical terms across our panel
| Limit | $25,000 to $2 million, larger where property security is offered |
|---|---|
| Rate range | Roughly 9% to 20% p.a. on the drawn balance |
| Line fee | Commonly 1% to 2% a year on the approved limit |
| Interest charged | On the drawn balance only, calculated daily |
| Term | Ongoing with annual review, or a set term of one to three years |
| Repayments | Interest-only on the drawn balance is common; principal at your discretion |
| Security | GSA and director's guarantee; property security increases the limit and cuts the rate |
| Minimum trading | Usually twelve months or more |
When it's the right structure
- Recurring but lumpy needs: stock buys, project mobilisation, a seasonal build.
- Opportunistic purchasing, where being able to move on stock at short notice is worth more than the facility costs.
- A standby buffer you'd rather have approved and unused than need to arrange under pressure.
- Contract work where you fund each job upfront and clear the balance when the progress claim lands.
Where it's the wrong structure: a single one-off purchase with a known amount and no repeat. A term loan will almost always be cheaper for that, because you're not paying a line fee to keep a limit open you'll never use again.
The line fee is the part people forget
Most lines of credit charge an annual fee on the limit, whether you draw on it or not. A $300,000 line at a 1.5% line fee costs $4,500 a year before you borrow a dollar. That's good value if you draw regularly and a waste if the limit sits idle. Worth being honest with yourself about which one you are.
What lenders are looking at
- Trading consistency across at least twelve months.
- Repayment behaviour on existing facilities.
- What the limit is for: a credit team wants to see a coherent reason for a revolving limit rather than a general appetite for headroom.
- Security available, which drives both the size of the limit and the price.
What you'll need to send
- Twelve months of business bank statementsEvery trading account. This is the main thing a lender reads.
- Your ABN and GST registrationWe pull most of this from the ABR ourselves.
- Director identificationDriver's licence or passport.
- An ATO integrated client account statementOnly where there's a balance owing.
- Recent financials and BASUsually only above $250,000, or where the lender asks.