Guide · Lines of credit, explained
Business line of credit or business credit card?
By Alex Makowski Published
The card is easier to obtain, better for everyday purchases and often carries a genuine interest-free period. The line gives you cash rather than purchasing power, at a materially lower rate than a card's cash advance, in amounts a card will not reach. Most businesses should have both, for different jobs.
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01
What each is actually good at
A card is for buying things from suppliers who take cards: fuel, materials, software, travel. Pay in full within the grace period and the credit costs nothing.
A line is for cash — payroll, rent, a supplier who takes bank transfer only, a tax bill. Cash from a card means a cash advance, which usually carries a fee, a higher rate and no grace period.
Limits differ by an order of magnitude. Business card limits commonly run in the tens of thousands; lines routinely reach six figures.
02
Cost, honestly compared
A card paid in full monthly is the cheapest credit in existence, because it is free. A card carrying a revolving balance is among the most expensive.
A line charges from the day you draw, with no grace period, but at a rate well below a card's revolving or cash-advance rate.
So the comparison is not card versus line in the abstract. It is: paid-in-full card, then line, then revolving card — in that order of preference.
03
Qualifying
Cards are easier. Many are underwritten largely on the owner's personal credit, and are available to businesses far too new for a line.
Lines are the hardest of the four funding products here: typically a score around 600, a year or more trading, and consistent revenue.
The practical sequence for a young business is a card first, then short-term funding repaid cleanly, then a line once the history supports it.
Written by
Alex Makowski, Owner
Alex Makowski owns and runs Business Loans for America and has been placing funding for U.S. small businesses since 2021. Businesses he has worked with have secured $50M+ in financing across 1,200+ placements. He writes and reviews every guide on this site.
FAQ
Related questions.
- Does a business card affect my personal credit?
- Often yes. Many business cards report to personal credit, and nearly all require a personal guarantee. Ask before assuming the business is separate.
- Is a cash advance on a card ever sensible?
- Rarely. Fee plus a higher rate plus no grace period makes it one of the most expensive options available. A line exists precisely to avoid it.
- Should I have both?
- For most established businesses, yes — the card for purchases paid in full, the line for cash. They are not competing products.
Guides
More on lines of credit, explained
Credit score needed
Around 600 and up — the highest bar of the four products.
Interest on what you draw
Only the drawn balance — but fees can apply to the rest.
With weak credit
Hardest product to get this way — secure it or use another one.
Secured or unsecured
Collateral buys a lower rate and a bigger limit — and real risk.
Drawing on it
As often as you like — but watch minimums and draw fees.
If it is cut
Usually account conduct, and usually visible months in advance.
Sources
- Consumer Financial Protection BureauFederal consumer-finance regulator. Publishes guidance on credit terms and disclosure.
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