Quick answer
A business line of credit is a pre-approved limit you can draw on when you need it and repay when cash comes in, paying for what you use. For emergencies, its value is that the approval happens before the crisis. Unsecured lines for trading businesses are typically sized on turnover, within the $5,000 to $500,000 range; property-secured lines can be larger. Set one up while things are calm.
Key points
- Approval in advance means drawing in an emergency can be almost immediate.
- Draw and repay repeatedly; generally pay for the funds you've used.
- Suits recurring pressure: Payday Super, BAS, seasonal gaps, slow-paying customers.
- Setting up a new line isn't usually a same-day exercise — do it before you need it.
- Unsecured
- Typically within $5k–$500k
- Best for
- Recurring gaps
- Set up
- Before the emergency
Why is a line of credit an “emergency” product?
Because the best emergency funding is funding you’ve already arranged. Every other loan on this site is assessed after the problem arrives, under time pressure. A line of credit is assessed while things are calm. When the garnishee, the breakdown or the late customer arrives, the money is already approved — you simply draw it.
That’s also why a line of credit isn’t usually the answer to an emergency that’s already happening today. New facilities take a little time to set up. If you’re in the middle of a crisis now, use a faster route for this one, then set up a line so the next one is easier.
Which businesses benefit most?
| Pattern | Why a line of credit helps |
|---|---|
| Fortnightly or weekly payroll with monthly receipts | Draw for wages and super, repay when customers pay |
| Payday Super deadlines every pay run | Covers super within 7 business days of payday |
| Quarterly or monthly BAS spikes | Draw for BAS, repay over the following weeks |
| Seasonal businesses | Cover the quiet months, repay in the peak |
| Customers who pay late | Bridge without a new application each time |
| Trades with progress claims | Fund materials and labour until claims are paid |
If any of these sounds like your business, see also the Payday Super shortfall and BAS due date pages.
How is a line of credit sized?
Unsecured lines for trading businesses are assessed much like unsecured loans: average monthly deposits, consistency, account conduct, existing debts and time in business. They’re typically sized within the $5,000 to $500,000 range. Property-secured facilities can be larger, using residential or commercial property.
A good rule of thumb: size the limit to your largest realistic timing gap, not your largest hope. Two pay runs, a BAS and a buffer is a common starting point.
Line of credit vs a one-off loan
| Line of credit | One-off emergency loan | |
|---|---|---|
| Set up | In advance | When the emergency hits |
| Draws | Repeated | One lump sum |
| Cost | Generally on amounts used, plus fees | On the full amount for the term |
| Speed in a crisis | Very fast once set up | Depends on route |
| Best for | Recurring gaps | One-off events |
Illustrative example: a builder with progress claims
Illustrative only. A Canberra residential builder runs four to six homes at a time. Progress claims arrive 14 to 30 days after each stage, but trades, materials and wages are due weekly. Twice last year, the builder needed emergency loans to cover gaps.
This year, the builder sets up a $250,000 line of credit while trading is steady. Each month it draws between $60,000 and $180,000 and repays as claims are paid. When a client’s bank delays a claim by three weeks, the builder simply draws more — no emergency, no new application.
Using a line of credit responsibly
- Repay as receipts land, rather than letting the balance sit at the limit.
- Don’t use it to fund losses. If the balance never comes down, there’s a deeper issue.
- Keep separate buffers for tax. Draw for timing, not to spend collected GST or withheld PAYG.
- Review the limit yearly as the business grows or changes.
How do I set up a line of credit while things are calm?
The best time to apply is a good month. Lenders see strong recent statements, there’s no deadline forcing a rushed choice, and you can compare terms properly. A simple process:
- Measure your typical gap. Use the last twelve months: when did the account dip lowest, and by how much?
- Add your known spikes. Quarterly BAS, annual insurance, seasonal stock purchases.
- Choose a limit that covers the biggest realistic dip with a buffer.
- Ask about costs on drawn and undrawn amounts, and any annual or line fees.
- Set rules for yourself: what the line is for, and how quickly drawn amounts must be repaid.
What should a line of credit not be used for?
A line of credit is for timing, not for funding losses or long-term assets. Warning signs it’s being misused:
- The balance hasn’t come down in months.
- It’s being drawn to make repayments on other loans.
- It’s funding equipment or fit-outs that would be better on a term loan or equipment finance.
- GST and withholding are being spent and the line is covering the BAS every quarter.
If any of those apply, a review with your accountant is worth more than a higher limit. A properly used line of credit should rise and fall with your cash cycle, not climb steadily.
Set it up before you need it
If your business keeps meeting the same squeeze, a standing facility turns emergencies into routine. Start a 60-second enquiry and tell us about your cash cycle.
There’s no credit check when you first enquire. We don’t hand your enquiry to a crowd of lenders — one specialist sizes the facility and calls you back. Please be accurate about turnover, pay cycles and when customers usually pay, so the limit fits how your business actually runs. See what limit you could access.
Frequently asked questions
How does a business line of credit work?
The lender approves a limit. You draw funds as needed, up to that limit, and repay as cash comes in. Repaid amounts can usually be drawn again. Costs are generally based on what you use plus any facility fees.
Is a line of credit the same as an overdraft?
They're similar in purpose. An overdraft is linked to your transaction account; a line of credit is usually a separate facility you draw into your account. Both provide flexible standby funds.
Can I get a line of credit the same day?
Usually not as a brand-new facility, because the lender assesses the limit up front. Once it's in place, drawing on it can be very quick — which is the point.
What size limit should I ask for?
Enough to cover your largest realistic gap — for example, two pay runs plus a BAS — with some buffer. Bigger isn't always better if there are fees on unused limits.