A business line of credit is a borrowing limit a business draws on as needed, paying interest only on the amount drawn. Ambercroft Business Capital, a small-business funding broker in Lafayette, Indiana, explains draw periods and revolving and non-revolving lines to Tippecanoe County owners and brings requests to lending partners, which decide and set rates and terms.
| Built for | Bills that recur but never in the same size |
|---|---|
| Interest | Only on money actually drawn |
| Types | Revolving, non-revolving, secured, unsecured |
| Draw period | The window in which you may draw, set by the agreement |
| Tippecanoe County context | 46.8% of employers had one to four staff (CBP 2023) |
| Decision maker | Whichever partner reviews it; Ambercroft never sets a limit |
| Address | N 6th St, Lafayette, IN; phone (765) 224-5060 |
Drawing: how money leaves the limit
Once a partner approves a limit, nothing is borrowed until you ask for it. A draw moves part of the limit into your bank account, and interest starts on that amount only. Repay it and, on a revolving line, the same amount becomes available again. A plumbing contractor might draw for a large fixture order, repay when the job is billed, and draw again for the next one, all within one approval.
The draw period and what follows
Many lines have a draw period: a set window, often a year or more, during which you can draw. Some agreements then renew the line after a review; others close it to new draws and convert the remaining balance into scheduled payments. Ask three questions before signing: how long the draw period runs, what happens to the balance when it ends, and whether the partner can lower or freeze the limit during the term.
Fees can attach to a line even when you do not draw, such as an annual charge or a fee per draw. Add them to any cost comparison.
Lines that refill and lines that do not
| Revolving | Non-revolving | |
|---|---|---|
| Repaid amounts | Become available to draw again | Do not come back |
| Feels like | A business credit card with a bank-account deposit | A loan you can take in pieces |
| Suits | Costs that recur all year | One project spent in stages |
A non-revolving line is useful when a project, such as fitting out a unit in phases, needs money released in steps but will not repeat.
Secured or unsecured lines
A secured line is backed by collateral, often receivables or inventory, and a partner may record a UCC financing statement against those assets. An unsecured line has no specific collateral but usually still carries a personal guarantee. Secured lines are often larger; unsecured ones are simpler to set up. Which you are offered depends on the partner's review.
Payroll from a credit line
Yes, in most agreements, and it is a natural fit when payroll gaps repeat on a pattern. Contractors billing in progress draws and practices waiting on claims often meet payroll from a line and repay as the money lands. The caution is the same as for any funding: if payroll is short every period because the business loses money, drawing deeper only grows the balance. Owners setting up a crew can read starting a construction company in Tippecanoe County for how a line fits a new trade business.
Sizing the limit you ask for
A limit should cover the largest gap you expect in a normal year, not the largest number a partner might approve. Look back over twelve months of bank statements and find the thinnest balances: how far below a comfortable cushion did the account fall, and for how long? That shortfall, plus a margin, is a defensible request. A limit far above it costs more if fees run on the full amount, and an unused limit can still count against the business when another partner reviews its obligations.
Write down how each draw will be repaid. A line that is drawn and never paid down has quietly become a term loan, usually at a worse price.
When a term loan beats a line
Draw on a line for costs that recur and change size; take a business term loan for one known cost paid over years. Retailers often use a line to restock between sales rather than financing each order; planning how much inventory a Lafayette store should carry helps size that limit. When the gap is a single event with an end date, working capital may be simpler.
What partners review for a line
- Several months of business bank statements and the pattern of the balance
- Revenue and how steady it is
- Existing debts and any other lines or advances
- The owner's credit history
- Receivables or inventory, if the line will be secured
Because a line can be drawn again and again, partners often review it periodically and may adjust the limit. Small employers, which make up most of Tippecanoe County's 3,857 employer establishments (U.S. Census Bureau, County Business Patterns 2023), are reviewed on their own statements. See the county's employer profile, funding by sector, all six options and the four steps.
By Ambercroft Business Capital · Updated