If you've been searching for "business line of credit" in Australia, you may have noticed that some lenders call this product a "business overdraft" instead - and vice versa. The two terms describe essentially the same product. This guide explains what a business line of credit is, how it works, and when it makes sense for your business.
Business line of credit vs business overdraft - what's the difference?
In Australia, the terms business line of credit and business overdraft are largely interchangeable. Both describe a revolving credit facility - an approved limit you can draw from, repay, and draw again - where you only pay interest on the amount you have outstanding.
The minor technical difference is that a traditional bank overdraft is linked directly to your business transaction account, while a line of credit may be a separate facility accessed via an app or online portal. In practice, both operate the same way for the borrower.
Simple answer: A business line of credit = a business overdraft. Both are revolving credit facilities where you draw what you need, repay it, and draw again. You only pay interest on what you use.
How a business line of credit works
Once approved, a credit limit is established - up to $500,000 depending on your business profile. You can access funds at any time, up to that limit, via your business bank account or a lender's app. The mechanics are:
- Draw funds - transfer to your business account when needed
- Use the funds - pay suppliers, wages, stock, whatever you need
- Pay interest - charged daily on the outstanding drawn balance only
- Repay - weekly repayments (automatically debited) that include principal and interest
- Redraw - as you repay, your available balance refreshes. Repeat as needed.
What can a business line of credit be used for?
A business line of credit can be used for almost any legitimate business purpose, including:
- Managing gaps between invoicing and payment
- Paying wages during slow periods
- Purchasing stock or inventory
- Paying suppliers ahead of client payments
- Funding short-term marketing or growth initiatives
- Covering unexpected business expenses
Business line of credit vs business loan
The key distinction is between revolving credit (line of credit/overdraft) and term debt (business loan):
- A line of credit is revolving - draw, repay, draw again. Best for ongoing cash flow.
- A business loan delivers a lump sum with fixed repayments. Best for a specific planned investment.
See: Business overdraft vs business loan - which is right?
Eligibility for a business line of credit in Australia
To access a business line of credit through OverdraftMe:
- Minimum 6 months trading with active ABN
- Minimum monthly turnover of $6,000
- Australian citizen or permanent resident, 18+
- Good credit history - Equifax 550 or above
- No recent defaults or dishonoured payments
- Active business bank account
- No upfront property security needed under $150,000
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