The mechanics
Approval sets a limit — say $75,000. Nothing is advanced and nothing is owed until you draw.
A draw moves money to your business account, usually within a day, and interest begins on that amount only.
Repayments restore the limit. Draw $20,000, repay it, and the full $75,000 is available again without a new application.
Most facilities are reviewed periodically, typically annually, at which point the limit can be raised, held or reduced.
What it costs to have
Interest on the drawn balance, charged for the days it is drawn. A facility used for ten days a month costs a fraction of a lump sum of the same size.
Sometimes a draw fee, a monthly maintenance fee, or a non-utilisation fee on the undrawn portion. These are the terms to ask about, because they are what make an unused line cost money.
Minimum draw amounts and minimum terms per draw are common and worth checking — a $500 need against a $5,000 minimum draw is an expensive way to solve a small problem.
What it is genuinely for
Recurring, predictable gaps: payroll against invoices, stock against a season, a payment run before a large receipt lands.
Opportunities that will not wait — a discounted bulk buy, a job that needs materials on Monday.
A buffer arranged while trading is good and held against the month it is not. A facility is worth far more put in place in advance than sought in a crisis, and that is the single most useful thing to understand about it.