How Does a Business Line of Credit Work?

By Zero Point Capital · Updated October 17, 2026

Short answer

A business line of credit is a revolving credit limit from a lender. You draw funds as needed up to the limit, repay what you used, and that amount becomes available to draw again. Interest is generally charged only on the balance you've drawn, not the full limit.

The basic cycle

The lender approves a maximum limit. You draw part of it, make payments under the lender's terms, and your available credit replenishes as you repay.

Some lines are open-ended and reviewed periodically; others have a set draw period followed by a repayment period. The terms depend entirely on the lender.

Secured vs. unsecured

A secured line is backed by collateral such as receivables, inventory or equipment. An unsecured line has no specific collateral but may require a personal guarantee from the owner.

What it's typically used for

Lines of credit are commonly used for short-term needs: smoothing cash-flow gaps, buying inventory ahead of a busy season, covering payroll timing or handling unexpected expenses.

Common costs to ask about

Beyond interest, lenders may charge origination, draw, maintenance or inactivity fees. Always compare the full cost in each lender's written terms.

Business line of credit consulting

ZeroPoint Capital Group provides consulting only. We help you assess readiness, organize documents, explore options and navigate applications. We are not a lender and do not make credit decisions. Independent lenders control eligibility, approval, pricing and funding. You may always apply to lenders directly.

Zero Point Capital and Elev8 Group Ai LLC is not a bank, lender, financial advisor, or loan officer. We do not make lending decisions or provide financial advice. We operate strictly as consultants and educators, guiding clients through funding strategies and available options based on their individual profiles and goals.

This guide is general information, not financial, legal or tax advice.