🔑 Key Features of a Business Line of Credit
| Feature | Description |
|---|---|
| Credit Limit | A fixed amount (e.g., ₹1 lakh – ₹5 crore), approved by the lender |
| Revolving Facility | You can borrow-repay-borrow again without reapplying |
| Interest | Charged only on the amount you use, not the full limit |
| Tenure | Often 12 months, renewable on review |
| Repayment | Flexible—monthly interest payments or periodic principal + interest |
| Secured/Unsecured | Can be either based on business size and creditworthiness |
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đź’Ľ How It Works (Example)
Bank approves a â‚ą10 lakh credit line
You use ₹4 lakh to pay suppliers → pay interest only on ₹4 lakh
After customer payments, you repay ₹2 lakh → available credit is now ₹8 lakh
You can keep reusing up to â‚ą10 lakh, as long as you stay within the limit
âś… Benefits
🏦 Flexible access to capital anytime
📉 Pay interest only on what you use
🧾 Great for covering cash flow gaps
🔄 No need to reapply every time you need funds
đź’ł Works like a safety net for emergencies or bulk orders
Apply Loan
đź“‹ Documents Required (Typical)
Business PAN, GST, and registration
KYC of proprietor/partners/directors
Bank statements (last 6–12 months)
ITR and financials (last 2 years)
Loan repayment history (if any)
đź“Ś Business Line of Credit vs. Business Term Loan
| Feature | Line of Credit | Term Loan |
|---|---|---|
| Repayment | Flexible, based on use | Fixed EMI or installments |
| Interest | Only on used amount | On full loan amount |
| Use flexibility | Reusable after repayment | One-time disbursal |
| Best for | Ongoing or unpredictable expenses | Fixed long-term investment |