Credit Limit vs Available Credit: How a Business Line of Credit Works

What the Credit Limit Is

The credit limit is the maximum amount of the facility approved under your credit agreement. It is set during the review and stays in place unless the agreement allows it to change. Business Line of Credit limits at The Final Loans range from $10,000 to $2,000,000.

What Available Credit Is

Available credit is the part of the limit you can use right now. It goes down when you draw funds and can go back up as you repay, under the terms of the agreement. That is what makes the facility revolving.

A Simple Illustration

For illustration only: if a business has an approved limit of $100,000 and draws $30,000, the available credit is $70,000. After the business repays part of the amount drawn, available credit can increase again, as the agreement allows. Your own figures and rules are set by your credit agreement.

How Draws Work

A draw is a request to use part of your available credit. Each draw adds to the balance you owe. Before you draw, consider what the funds are for and how the repayment will fit your cash flow.

How Repayment Works

Repayment reduces the balance you owe and can restore available credit. The agreement sets the payment schedule, how interest is charged on the amount used, and any other repayment obligations. The Business Line of Credit has an average interest rate of 3% to 13%, and your actual rate depends on the review.

Good Habits for Managing a Credit Line

• Draw only what the business needs for a clear purpose
• Track your balance and available credit regularly
• Plan repayments around your incoming revenue
• Read the agreement so you know how draws, interest, and payments work

Next Steps

Compare the two structures in our Line of Credit vs Term Loan guide, or see the requirements on the Business Line of Credit page.