A business line of credit: your standby buffer for lean weeks

Some tradies borrow once a year for a big purchase. Others find that cash gets tight for a week or two, over and over: before a builder’s payment lands, during a wet spell, in the week the BAS is due. For the second group, a line of credit is a more natural fit than a series of separate loans.

What exactly is a business line of credit?

Think of it as a pre-agreed limit sitting in the background. You do not receive the money upfront. You draw from it when you need to, repay it when your customers pay, and the available limit refreshes.

The structure matches the way trade income works: lumpy, with occasional dips that are predictable in shape but not in timing.

Compare that with the alternatives:

Feature	Line of credit	Term loan
Money arrives	When you draw	All at once
Repeat use	Yes, within the limit	No, one lump sum
Best for	Recurring gaps	A single defined purchase
Planning needed	Light, ongoing	Upfront, specific

Both have a place. The short-term loans page explains where the second option shines.

How would a tradie actually use one?

A few typical moments, with an illustrative example below. No real business is involved.

• A pay run lands before a builder’s claim is paid.
• A supplier wants payment for a big order before the customer’s deposit clears.
• A wet fortnight cancels work, but the repayments continue.
• The BAS is due and a payment you expected is late.

In a simple scenario, a business has a $60,000 limit. A claim is late, so the owner draws $18,000 to cover wages and materials. Nine days later the builder pays, the $18,000 goes back in, and the full $60,000 is available again. The cost is tied to the days the money was out, not to a fixed lump sum for months.

If wages are the main pressure, paying subbies and wages between payments goes deeper on timing.

What decides the size of the limit?

Lenders want to see that the business can support repayments, so they look at:

1. Turnover. The size and consistency of money coming in.
2. Bank statements. A recent run of statements shows the rhythm of deposits and expenses.
3. How long you have traded. A longer history helps but is not the only factor.
4. The reason for the limit. A clear explanation of the gaps you expect shows you have thought it through.

Unsecured limits typically sit between $5k and $500k. If you own property, secured facilities from $20k to $5m become possible, which may suit a larger or longer-running need.

You can get ready before you ask. The loan readiness checklist lists the documents most lenders request.

What should I watch out for?

A line of credit is flexible, and flexibility can drift into habit.

• Using it as permanent funding. If the balance never returns to zero, you are really running the business on borrowed money. A term loan or a pricing review may be the better answer.
• Forgetting about repayment timing. Know where the repayment will come from before every draw.
• Not checking costs. Ask exactly how the facility is charged, including any fees for holding the limit.
• Letting it sit idle until a crisis. Arrange it while your books look healthy.

Wet-season cover is a classic use. Our page on wet weather cash flow explains how to plan for it. And if you are wondering whether a different structure fits better, the unsecured cash flow loans page compares them.

When you are ready for a conversation, see what limit might suit you.

Is a line of credit right for my trade?

It fits if your gaps are short, frequent and repaid by customers. It fits less well if you need to buy a single large asset, in which case equipment or vehicle finance usually makes more sense, or if your business has no regular pattern of income.

A quick test: write down the last three times cash got tight. If each one was solved by money arriving within a few weeks, you are describing a line-of-credit problem.

How do I keep a line of credit under control?

Give every draw a purpose and a pay-back date. A simple habit works well: when you draw, write one line in your notes saying what it covers and which payment will clear it. If you cannot name the payment, pause before you draw.

Review the balance every Friday along with your invoices. If the balance is climbing across several weeks instead of rising and falling, that is a warning that the business needs a different fix, such as firmer payment terms, a price rise or a longer-term loan.

Treat the limit as a safety net rather than extra income. Tradies who use it that way tend to keep the cost low and the facility available for the day it is truly needed.

Set up a buffer before you need it

The cheapest time to arrange a standby limit is when you do not need it. Enquiring takes about a minute and comes with no credit check, so asking will not mark your file. We do not circulate your details to a heap of lenders, so you will not be bombarded.

A real person reads your situation and calls to talk it through. Answer the form accurately, with real turnover and the pattern of your gaps, so we can recommend the right structure the first time.

Start your enquiry →