By John Pierre Saliba - Senior Finance Broker - OverdraftMe
A business line of credit is a revolving facility that gives your Australian business access to funds up to an approved limit - draw what you need, when you need it, and only pay interest on what you use. It's one of the most flexible working capital tools available to SMEs and is used by hundreds of thousands of Australian businesses to manage cash flow gaps, fund growth, and cover unexpected expenses.
This guide covers everything: how a line of credit works, what it costs, who qualifies, how it compares to loans and overdrafts, and how to get one through a broker.
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Check eligibility → Call 02 8046 3933A business line of credit is a pre-approved borrowing facility with a set limit. Unlike a term loan where you receive a lump sum and repay over a fixed period, a line of credit lets you draw and repay repeatedly. When you repay, the funds become available again - no new application required.
Think of it like a pool of money your business can dip into whenever needed. You might draw $20K to buy stock this week, repay $15K when a client pays next week, then draw $30K for payroll the week after. The facility revolves continuously.
Interest is charged only on the amount you've drawn - not the full limit. A $100K line of credit sitting unused costs only the line fee (typically $1,000-$2,000/year). The moment you draw, interest starts accruing on the drawn amount only.
There are three cost components to a business line of credit in Australia:
| Cost | Unsecured (non-bank) | Secured (bank) |
|---|---|---|
| Interest rate | 14.55% - 25% p.a. | 6% - 12% p.a. |
| Line fee (on total limit) | 1% - 2% p.a. | 0.5% - 1.7% p.a. |
| Establishment fee | $0 - $995 (one-off) | $500 - $2,000+ (one-off) |
| Monthly account fee | Usually $0 | $10 - $30/month |
| Usage | Avg drawn | Monthly interest (18%) | Monthly line fee (1.5%) | Total monthly |
|---|---|---|---|---|
| Light (25%) | $25,000 | $375 | $125 | $500 |
| Moderate (50%) | $50,000 | $750 | $125 | $875 |
| Heavy (75%) | $75,000 | $1,125 | $125 | $1,250 |
| Fully drawn | $100,000 | $1,500 | $125 | $1,625 |
All interest and fees are tax deductible. At the 25% base rate entity tax rate, a $875/month cost effectively becomes $656 after the deduction.
In practice, a business line of credit and a business overdraft are almost identical products. Both are revolving facilities, both charge interest only on drawn amounts, and both can be unsecured.
The technical difference is how you access funds:
| Business line of credit | Business overdraft | |
|---|---|---|
| How you access funds | Transfer from a separate facility to your bank account | Directly linked to your business transaction account - draw by going into negative |
| Interest rate | 14.55% - 25% (unsecured) | 14.55% - 25% (unsecured) |
| Revolving? | Yes | Yes |
| Tax deductible? | Yes | Yes |
| Approval speed | Same day | Same day |
Most non-bank lenders use the terms interchangeably. When you apply through OverdraftMe, we match you to the best product regardless of what it's called - the rates, terms, and functionality matter more than the label.
Read our full line of credit vs overdraft comparison
| Line of credit | Term loan | |
|---|---|---|
| Structure | Revolving - draw and repay repeatedly | Lump sum with fixed repayments |
| Best for | Ongoing cash flow management | One-off purchases (equipment, vehicles) |
| Interest charged on | Only what you draw | The full loan amount from day one |
| Repayments | Flexible - repay when cash allows | Fixed weekly/monthly schedule |
| Reusable? | Yes - facility resets when repaid | No - need to reapply for more |
| Rate | 14.55% - 25% (unsecured) | 12% - 22% (unsecured) |
Use a line of credit for ongoing working capital needs. Use a term loan for specific purchases with a defined repayment timeline.
We'll recommend the best option for your situation. No obligation.
Get a recommendation →| Monthly revenue | Typical line of credit limit |
|---|---|
| $6,000 - $15,000 | $10,000 - $25,000 |
| $15,000 - $30,000 | $25,000 - $50,000 |
| $30,000 - $80,000 | $50,000 - $150,000 |
| $80,000 - $200,000 | $150,000 - $300,000 |
| $200,000+ | $300,000 - $500,000 |
Most non-bank lenders approve 1-1.5x your average monthly revenue. Use our borrowing calculator for an instant estimate.
OverdraftMe compares 50+ lenders including Shift, Prospa, Moula, Banjo, Bizcap, Lumi, OnDeck, and Judo Bank. We submit to one lender only - the best match for your profile. Your credit score stays protected.
A line of credit works for almost every industry. Here are guides for the most common:
Browse all 111 industries we serve
Read our full advantages and disadvantages breakdown
In practice, yes. Both are revolving facilities where you draw and repay as needed, paying interest only on drawn amounts. The difference is technical - an overdraft is linked to your transaction account, while a line of credit may be a separate facility. Most non-bank lenders treat them as the same product.
Yes. The minimum Equifax score for most non-bank lenders is 550. Some go lower. Bad credit may mean a smaller limit and higher rate, but it doesn't automatically disqualify you. Read our bad credit guide.
Through OverdraftMe, decisions come from 1 hour and same-day funding is available for straightforward applications. Apply before 11am for the best chance of same-day settlement. Read our same-day funding guide.
Yes. All interest and fees on a business line of credit used for business purposes are generally tax deductible. Read our tax deductions guide.
No. Unsecured lines of credit up to $500K are available based on business cash flow alone. Read our no-property guide.
6 months with most non-bank lenders. Banks typically require 2+ years. Read our new business guide.
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