A business line of credit is a borrowing limit the business draws on as needed, with interest charged on the amount drawn rather than the full limit. Silvershore Funding Group, a small-business funding broker in Flagstaff, Arizona, explains draw periods, revolving and non-revolving lines and renewals, and connects Coconino County owners with lending partners, who approve lines and set rates and terms.
| What it is | A limit the business borrows against as needed |
|---|---|
| Interest | Charged on the drawn balance, not the unused limit |
| Revolving line | Repaid principal can be drawn again |
| Non-revolving line | Each draw reduces what is left; repaying does not restore it |
| Who decides | The lending partner, not Silvershore Funding Group |
| Office | 10 N Leroux St, Flagstaff, AZ 86001 · (928) 239-1321 |
What it means to draw on a line
When a partner approves a line, nothing is borrowed yet. The business has a limit. Drawing means moving part of that limit into the business account, by online transfer, check or card depending on the product. From that moment the drawn amount is a balance you owe, and interest starts on it.
Because you borrow only what you draw, a line suits costs whose size and timing you cannot predict exactly: materials for a job that has not been priced yet, a reorder when a product sells faster than expected, or payroll in a week when a large customer pays late.
How interest works on a business line
Interest is charged on the outstanding balance, not on the full limit. A business with a large limit and a small balance pays interest only on the small balance. Some agreements also charge fees, for example to open or renew the line or on each draw, and those belong in any cost comparison alongside the interest.
Payments are set by the partner. Some lines ask for interest only during the period you can draw, with principal due later; others require a share of the principal with every payment. Our line of credit payment calculator runs the arithmetic on a single draw using numbers from an offer you hold.
The draw period and what comes after
Many lines have a draw period, the stretch of time during which you can take money. When it ends, the line may renew after a fresh review, convert any remaining balance into installments over a repayment period, or simply expire with the balance due. The agreement says which, and it is worth knowing before you rely on the line for a recurring expense.
Partners usually review a line again at renewal. If revenue has fallen or the line has stayed fully drawn for a long time, the partner may lower the limit or decline to renew, so treat a line as flexible money for gaps that close, not as permanent capital.
Revolving or non-revolving
On a revolving line, repaying principal frees that amount to draw again, for as long as the draw period lasts. On a non-revolving line, each draw permanently reduces what remains available; repaying does not restore it, so it behaves more like a loan paid out in pieces. Construction-style projects with staged spending sometimes use the non-revolving shape.
The full comparison, with examples of how each type behaves over a year, is in our guide to revolving vs. non-revolving lines of credit.
Secured or unsecured lines
A secured line is backed by collateral, often receivables, inventory or a general lien on business assets, and the partner usually files a UCC financing statement to record its claim. An unsecured line names no specific collateral, but partners commonly ask the owners for a personal guarantee. Read the agreement for both before you sign.
When a line fits better than a loan
| Your situation | Usually the better fit |
|---|---|
| Costs recur at different sizes through the year | Line of credit: draw and repay as needed |
| One project with a fixed price | Term loan: one sum, fixed schedule |
| A single gap with a clear end date | Working capital financing |
| Stock bought ahead of sales | Inventory financing or a line |
In Coconino County, the businesses that buy materials or stock again and again are numerous. The county had 550 retail employer establishments and 256 specialty trade contractors in 2023 (U.S. Census Bureau, County Business Patterns 2023). For them, the repeated purchase is the point of a line: the limit is drawn for one order or job, paid down when the customer pays, and drawn again for the next. Industry pages cover contractors, restaurants and medical and dental practices.
What partners usually review
- business bank statements and the pattern of deposits;
- time in business and annual revenue;
- existing credit lines, loans and liens;
- business and owner credit;
- for a secured line, the collateral and how it is valued.
The partner sets the limit, the pricing and the draw terms. Each stage of a request is set out on the process page, and local business figures are on our Flagstaff page.
By Silvershore Funding Group · Updated