How to choose the best business line of credit for your limited company

There is no single best business line of credit, and the harder fact comes first: very few UK lenders sell a true one to a small limited company. Search for a business line of credit and most of what comes back is a business overdraft, a business credit card, or an instalment facility. The banks that do publish a revolving credit facility keep it in their corporate divisions. So the useful question isn't who is best. It's which of those shapes fits the way your company actually borrows, and what you'll pay in the months you don't use it.

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What a business line of credit is, and how it differs from a term loan

A business line of credit gives your company access to funds up to an agreed limit. You draw what you need and pay interest on what you've drawn rather than on the whole limit.

Where the facility revolves, money you repay becomes available to borrow again. Our guide to line of credit loans covers the mechanics, and a revolving credit facility is the version that renews automatically.

What separates it from a term loan is what you're committing to. A term loan is a fixed sum on a set schedule, which suits a one-off investment like machinery or an office fit-out. A line of credit isn't tied to any particular spend. It can cover buying materials, repairing a leaky pipe, or covering payroll during a lean month.

The assumption underneath most searches for one is that a facility avoids a long commitment, and that isn't reliably true. A facility has a term too. Lloyds publishes revolving credit on 'a minimum loan term of a year up to a maximum of five years', the same commitment as a term loan. So if escaping a multi-year agreement is why you want a line of credit, check the term on whatever you're offered.

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What decides which one is best for your company

Six things separate one facility from another. For most companies two of them settle it: whether you can get one at all, and what it costs in the months you barely touch it.

• Who will actually lend to you. Published eligibility varies far more than published pricing does.
• The total cost, not the headline rate. Fees charged on the limit can outweigh the interest on the money.
• Whether it revolves. Whether you can repay and redraw, or it's one draw-down and done.
• Security, and what a director signs. What the lender takes if things go wrong, and from whom.
• The term, and what happens at renewal. Most facilities are reviewed once a year.
• Speed. How long a decision takes, and how long the money takes after that.

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Who actually offers a business line of credit in the UK

Fewer providers than the search results suggest. We read seven providers' own pages on 20 October 2026, and the pattern was consistent: the high street banks' small business sections offer overdrafts, the revolving credit facilities sit with their corporate arms, and several of the names that rank for 'business line of credit' are selling something else entirely.

This is what each type of provider published that day.

Two of those facts are worth sitting with. Lloyds' revolving credit runs for a year to five years, so the commitment is a loan's commitment. And four of the seven publish no rate at all, so comparing what a facility would cost you before you apply is mostly not possible.

We see the same gap from the broker side. Our research with finance brokers, published in August 2025, found that 61% submit over half of their loan applications to alternative lenders, and 71% say mainstream banks are reducing their appetite for small business lending (iwoca SME Expert Index). It bites hardest on companies with no property to secure a facility against and only a year or two of filed accounts, which are the ones a bank's scorecard has least to read.

If an overdraft would do the job, we've set out what nine UK banks charge for a business overdraft. And if you want a genuine revolving facility, our guide to revolving credit facilities covers who offers one and what they ask for.

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What a line of credit costs, including the months you don't use it

Who has the best business line of credit rates? Nobody publishes enough for that question to have an answer, which is worth knowing in itself. What you can compare is the shape of the charge, because a facility bills you in three places at once:

• An arrangement fee, charged on the whole limit when the facility is set up.
• A commitment or non-use fee on the part of the limit you haven't drawn.
• Interest on what you have drawn, for as long as you owe it.

Add a renewal fee each year you keep it open.

Broker Capitalise publishes indicative figures across its lender panel: arrangement fees 'typically 1% to 3% of the agreed limit', interest 'from around 1% to 4% a month on funds drawn', limits 'usually around 1 month's turnover', and terms of six to 24 months, renewable. Those are a panel's ranges rather than one lender's terms, but they show where the money goes.

Take a £50,000 facility at a 2% arrangement fee, the middle of that range. That is £1,000 before you borrow anything. Draw £10,000 for a month at 2% a month and the interest is about £200, so having the limit costs five times what using it does.

Which is why 'best' turns on a question only you can answer. Will you be in and out of this facility most months, or holding it for the two or three times a year you need it? Used continuously, the fee on the limit spreads thin. Used occasionally, it is most of what you pay.

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Monthly rates and APRs aren't the same number

A rate quoted per month compounds, so 2% a month is nearer 27% a year than 24%. An APR annualises the interest plus any compulsory fees, which makes it the fairer way to weigh two offers against each other, when both lenders publish one. Our guide to business loan interest rates goes further into how lenders set yours.

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There is no reliable UK average

No UK body publishes an average rate for a business line of credit, so treat any page quoting one with suspicion. The nearest honest reference point is the Bank of England's effective interest rate on new loans to small and medium-sized businesses, 6.63% in August 2026. That covers all new bank lending to companies with turnover of £25m or less, not lines of credit, and bank lending is the cheaper end of the market. Read it as a floor the rest sits above rather than a benchmark for a facility like this.

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Secured, unsecured, and the director's personal guarantee

A secured facility is backed by something the lender can take: property, equipment, or stock. That usually buys a higher limit and a lower rate, and the risk is the obvious one. If the company can't repay, you lose the asset. An unsecured facility pledges nothing, so it is quicker to arrange, and limits tend to be smaller and rates higher. Our guides to a secured business line of credit and an unsecured business line of credit go into each, and loan security types explains what lenders accept.

Unsecured doesn't mean nothing is at stake, and this is the part most pages skip. A personal guarantee is a promise from a director to repay personally if the company can't, and on a revolving facility it is the norm rather than the exception. OakNorth says so on its own page: 'Most lenders, including us, will ask you to provide a personal guarantor when you take out a revolving line of credit.'

That holds for us too. Every new iwoca Flexi-Loan needs a personal guarantee from at least one director, though not every director has to sign. Read what you're signing before the money arrives rather than after, and take advice on anything that isn't clear.

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Whether your company will qualify

Lenders read three things: how long you've traded, what's coming through the business, and what your credit file says about how you've handled borrowing before. Banks want more of all three than online lenders do.

Published criteria are rare, which makes Bizcap's a useful marker of where the online end sits: an active company number, at least nine months of trading, and a minimum monthly revenue of £20,000. A bank will generally want longer, and often something to secure the facility against.

What to have ready before you apply:

• Three or six months of business bank statements, or access to your bank data.
• Your latest filed accounts, if you're asking for a larger amount.
• What the money is for, and when you expect to repay it.

It's worth seeing what a lender sees first. iwoca Credit Compass is free, and shows your Equifax business credit score alongside four more scores, what's affecting them, and the areas worth working on. Fixing something visible there costs less than collecting declines.

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New companies and startups

A facility is harder to come by without a trading record, and the amounts are smaller when you get one. Banks rarely offer a line of credit to a company with no filed accounts. We lend to UK limited companies including newer ones, starting smaller and growing as the trading record does. If that's where you are, our guide to getting a line of credit to start up a business covers the options.

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When a line of credit is the wrong tool

Is a business line of credit a good idea? It is when your money arrives later than your costs do, and it does arrive. It isn't when the gap is a trading problem rather than a timing one.

It usually fits when:

• Customers pay reliably, but on 30, 60, or 90-day terms.
• Sales are seasonal and stock has to be bought before the busy period.
• Payroll goes out before the month's invoices land.

Think again if costs are running ahead of income most months with no clear end in sight, or if you'd be borrowing again to make the repayments. A facility makes a timing problem manageable and a solvency problem worse. The gaps you can already see belong in your cash flow forecast rather than in next quarter's surprises.

A line of credit also isn't always the right shape. If it's the same slow-paying invoices every month, invoice finance tracks your sales instead of a limit someone set once a year. For a buffer on the account your payments already leave from, that's a business overdraft. For day-to-day running costs, a working capital line of credit is the same product aimed at that job. And if the need is a known amount over a known period, a loan is simpler, and usually cheaper than paying to keep a facility open.

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What iwoca lends instead of a line of credit

We don't offer a business line of credit. We lend a fixed amount over a fixed term, and on a page like this one it's worth saying that plainly rather than leaving you to work it out.

Here's what that is good for. If a VAT or corporation tax bill is due before your cash comes in, an iwoca Flexi-Loan lets you pay it on time and repay early for free once your sales catch up. The same goes for waiting on an invoice, or payday landing before a big customer does.

A Flexi-Loan is a business loan with flexible repayment options, from £1,000 to £1m, and the amount we offer is usually up to one month's turnover. You choose a fixed term of between 12 months and five years, so you know the repayment schedule from the outset. Because there's no fee for repaying early, you can clear it as soon as the cash arrives, and many of our customers only take out our finance for a few weeks, or even days. Interest runs on what you've drawn and still owe, for the days you owe it.

Two things help you plan rather than scramble. You have 30 days after approval to draw the money down, so the funding can be in place before the gap opens rather than after. And if something else comes along later, you can ask to top up.

Flexi-Loan in action: Dovetail & Slate

A seasonal dip put pressure on cash flow at Guy Walker's recruitment business, and he needed funding to cover VAT, salaries, and supplier bills until revenue picked up. He bridged the gap without committing to funding for longer than he needed, repaying as cash flow recovered.

Read Guy's story

Where this isn't the answer: if what you want is a facility sitting there all year for you to dip in and out of without reapplying, a revolving facility from a lender that sells one is the better fit. We don't sell one, and a loan repaid and borrowed again isn't the same thing. The banks and online lenders above publish what they'd need from you.

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Business line of credit FAQs

Which business line of credit is the easiest to get?

Online lenders set broader criteria than banks and say so publicly. Bizcap asks for nine months of trading and £20,000 of monthly revenue, where a bank will generally want more. Easiest isn't the same as best, so check the total cost and every fee before you accept an offer.

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Can I get a business line of credit with bad credit?

Possibly, with a smaller limit, a higher rate, or security attached. Check your business credit score before you apply, so you know what lenders will see.

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Does iwoca offer a business line of credit?

No. We lend a fixed amount over a fixed term of 12 months to five years, with no fee for repaying early, so a short borrow costs you a short borrow's interest. It suits a known need rather than a facility you keep on standby.

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How quickly can I get a business line of credit?

It depends who you ask. A bank facility usually means an appointment and a review of your accounts. With us, a decision is typically made within 24 hours, though it might be longer depending on the complexity of the request. A quick decision isn't a light one: we look at your revenue and what your business can afford to repay before we make an offer, and our credit team reviews larger or more complex applications.