Line of credit

A Line of Credit (LOC) is a flexible loan from a bank or financial institution. Similar to a credit card, it gives the borrower a maximum limit and allows for borrowing as needed, paying interest only on the amount used. LOCs can be secured or unsecured, with unsecured lines typically requiring a higher credit score due to the increased risk to lenders. They are particularly useful for covering unexpected expenses, bridging temporary cash flow gaps, or funding specific projects that don’t have a fixed cost upfront. Once you repay what you’ve drawn, that amount becomes available to borrow again, which makes a line of credit a renewable source of capital rather than a one-time lump sum. For many businesses, having one in place before it’s needed means being ready to act when an opportunity or a shortfall arrives.