A business line of credit gives a business a borrowing limit to draw from as needed, with interest charged only on the outstanding balance. Canyonwick Finance, a small-business funding broker in New Braunfels, TX, explains how draws and repayment work and introduces requests to lending partners, which set the limit, rate and terms.
| Built for | Recurring gaps in changing amounts |
|---|---|
| Interest | Runs only on the dollars you have pulled |
| Types | Revolving (refills) or non-revolving (one use) |
| Comal County, TX context | 406 specialty trade contractor employers, 55.2% under five staff (CBP 2023) |
| Decision | A lending partner; Canyonwick Finance arranges |
Limits, draws and repayment
The partner sets a maximum limit. You draw on it, meaning you move money from the line into your account, when you need it. Interest accrues on the drawn balance only, typically calculated daily and billed monthly. Each repayment frees up that much of the limit again. A line with nothing drawn usually costs nothing in interest, though some partners charge maintenance or draw fees, which belong on your comparison sheet.
Most business lines have a draw period, the window during which you can take money out. After it ends, some lines renew on review; others convert the remaining balance into a repayment schedule. Ask what happens at the end of the draw period before you sign.
Revolving and non-revolving lines
A revolving line refills as you repay, much like a credit card, and can be used again and again during the draw period. A non-revolving line lets you draw up to the limit, but repayments do not restore the available amount; once used, it is gone. Non-revolving lines suit a single project with staged costs. Revolving lines suit a business with recurring gaps.
Who in the area uses one
Trades contractors are a clear example. Comal County had 406 specialty trade contractor employer establishments in 2023, and 55.2 percent of them had fewer than five employees (U.S. Census Bureau, County Business Patterns 2023). A small electrical or plumbing outfit buys material and pays its crew before it is paid by the builder, job after job. A revolving line can cover each gap and be paid down when the draw arrives. Our contractor cash flow notes cover forecasting those gaps.
Owner-operators count too. The county had 2,462 construction businesses with no paid employees in 2024 (U.S. Census Bureau, Nonemployer Statistics 2024). Those numbers come from a different survey and year than the employer count, so they should not be added together, but they show how much of the local trade is very small.
Secured or unsecured lines
Some lines are secured by receivables, inventory or a blanket lien on business assets; others are unsecured but still require a personal guarantee from the owner. Secured lines may offer a larger limit or a lower rate, at the cost of putting assets at risk. Read the security clause and ask whether the partner will file a UCC financing statement.
Line of credit, term loan or working capital
- A term loan suits one large purchase at a known price.
- Working capital financing suits a single gap with a clear end.
- A line of credit suits gaps that repeat, in amounts that change.
If you already use a business credit card for small costs, the card-versus-line comparison explains where each one makes sense. Preparing to add your first employee? The first-hire checklist shows how a line can sit behind a new payroll. The other options are in the six-way comparison.
Using the line well
- Draw for timing gaps, not for losses. A line that never returns to zero is a term loan with a variable payment.
- Repay from the cash the draw was meant to bridge, such as the builder's draw or a large invoice.
- Track the draw period end date and any annual review.
- Keep the line's statements with your books so interest is recorded as a business expense.
Partners usually ask for recent bank statements, tax returns or financial statements, a receivables report and owner identification. The sector pages show how the need looks by trade, the area business profile gives local counts, and how a request works explains the steps.
By Canyonwick Finance · Updated