Direct answer
A business line of credit, or overdraft, is a revolving facility drawn as needed and repaid as cash flows into the business, rather than a lump sum repaid on a fixed schedule. In Australia it is arranged through banks and private lenders, either secured by property or unsecured against the business's cash flow, and runs as an ongoing facility reviewed periodically rather than a fixed-term loan.
Who uses it and why
Many businesses don't have a single, one-off funding need so much as a recurring, variable cash-flow rhythm — money is required at some points in the cycle and available again at others, and a fixed-term loan is a poor fit for that pattern. A seasonal business builds up stock and staffing ahead of its peak trading period, drawing on a facility through the lead-up and repaying it as sales come in. A contractor takes on a new job, draws funds to cover materials and labour upfront, and repays the facility once the client pays. A business managing the timing gap between paying suppliers and being paid by customers uses the facility as a buffer, drawing and repaying continuously as that gap fluctuates.
The advantage over a term loan is that interest is generally charged only on the amount drawn, not the full facility limit, and funds can be redrawn without a new application each time the need arises. Typical borrowers are seasonal businesses, contractors managing project-based cash flow, and any business whose working capital needs fluctuate through a regular cycle rather than arising as a single, fixed amount.
Set up once and reused repeatedly, a line of credit also removes a source of friction that a series of separate short-term loans would otherwise create — no new application, no fresh approval each time, just a facility sitting in reserve for whenever the business's cash-flow rhythm calls on it.
What lenders look at
Where the facility is secured, typically against residential or commercial property, loan-to-value ratios extend to around 65–75%, generally supporting a larger limit and better pricing than an unsecured equivalent. Where unsecured, the facility is sized against the business's cash flow and trading history rather than an asset, generally resulting in a more modest limit reflecting the lack of security.
Lenders look closely at how a facility has actually been used and repaid over time — a business that draws down and pays back regularly, demonstrating genuine cash-flow cycling, is viewed more favourably than one that draws to its limit and stays there, which starts to look more like permanent debt than a working-capital tool. Banks generally offer the sharpest pricing for established, secured facilities with strong trading history; private lenders serve businesses needing an unsecured facility or a faster setup than a bank's process allows.
Documentation is generally full-doc or alt-doc, and the facility is typically reviewed periodically — annually in many cases — rather than maturing on a fixed date, with the lender reassessing the business's position and the appropriate limit at each review. Credit history carries reasonable, moderate tolerance, similar to unsecured business lending generally — minor, explained defaults are commonly accommodated, particularly where the facility is secured.
Utilisation patterns are watched closely at each review: a business that draws down for a genuine, temporary need and returns to a low or zero balance between cycles demonstrates exactly the kind of usage this product is designed for, and tends to see its limit maintained or increased at renewal as a result. Lenders generally view this pattern as a positive sign of financial discipline rather than a reason to reduce the facility at review.
Typical terms
|
|
| Size |
$50,000 to $5m, subject to lender assessment |
| LVR |
Typically up to 65–75% where secured by property; unsecured limits sized on cash flow |
| Term |
Revolving, generally reviewed annually rather than a fixed maturity |
| Speed |
Indicative funding in 3–10 business days from a complete application |
| Security |
First mortgage over property, or unsecured with a GSA and guarantee |
| Pricing |
Priced on risk and security; indicative range on enquiry |
Structures we see most
Secured business overdraft. Backed by a first mortgage over residential or commercial property, generally supporting the largest limits and the sharpest pricing available for this product.
Unsecured line of credit. Sized against the business's cash flow and trading history without property security, suiting a business that wants flexibility without encumbering an asset, generally at a more modest limit.
Seasonal facility. Structured with an eye to a specific trading cycle — building toward a peak season and drawing down through the lead-up — with the limit and review timed to match that pattern.
Trade-linked facility. Drawn specifically to fund supplier payments or project costs as new work is taken on, repaid as each job or trade cycle is invoiced and collected.
Multi-purpose overdraft. A single facility used flexibly across working capital, opportunistic purchasing and short-term cash management, rather than being tied to one specific use, giving the business broad flexibility within the approved limit.
Costs and how we're paid
Pricing on business lines of credit typically includes an interest rate charged on the amount drawn and a line or facility fee on the total limit, whether drawn or not, and is quoted on enquiry once a lender has reviewed the file — no flat rate applies across the product. All costs, including any annual review fee, are set out in the facility offer before a borrower commits.
Solara is remunerated by the lender, the borrower, or both, depending on structure, which may include a commission from the lender and/or a broker fee agreed with the borrower. Any commission or fee is disclosed in writing before an application proceeds.
Process and timing
- Initial scoping call — typically same day. We confirm the business's cash-flow pattern, whether security is available, and the limit required.
- Document collection — typically 1–3 business days. Financials or bank statements appropriate to the doc level, and title information if the facility is to be secured.
- Lender matching and submission — typically 1–2 business days. We place the file with the banks and private lenders whose appetite matches the business's profile and security position.
- Approval and offer — typically 3–7 business days.
- Documentation and facility activation — typically 1–3 business days once terms are accepted and, where applicable, security is registered.
Frequently asked
What is a business line of credit?
It is a revolving facility that a business draws against as needed and repays as cash comes in, with interest generally charged only on the amount drawn, distinct from a term loan with fixed repayments over a set period.
What's the difference between a business line of credit and an overdraft?
The terms are largely used interchangeably in Australian business banking — both describe a revolving facility attached to or linked with a business's transaction account, drawn down and repaid flexibly within an approved limit, though some lenders reserve "overdraft" for a facility directly attached to the transaction account itself.
Do I need property to get a business line of credit?
No — unsecured facilities are available, sized against the business's cash flow and trading history, though a property-secured facility generally supports a larger limit and better pricing.
How is interest charged on a line of credit?
Generally only on the amount actually drawn at any point in time, rather than on the full approved limit, which is the main advantage over a lump-sum loan for a business with fluctuating cash-flow needs.
Does a line of credit expire?
It is typically reviewed periodically, often annually, rather than maturing on a fixed date like a term loan, with the lender reassessing the business's position and the facility limit at each review, and renewing the facility for a further period where the business's position remains sound.
Can my limit increase as my business grows?
Yes, generally — as trading strengthens and the business demonstrates consistent use and repayment of the facility, most lenders will consider increasing the limit at a subsequent review.
Is a line of credit suitable for a seasonal business?
Very much so — this product is often structured specifically around a seasonal trading cycle, drawn down ahead of a peak period and repaid as sales come through, with the limit typically set to accommodate the full extent of that seasonal swing.
What happens if I consistently draw my facility to its limit?
Lenders view sustained, maximum utilisation differently to genuine cash-flow cycling, and it may prompt a conversation at review about whether a term loan or a larger facility better suits the business's actual, ongoing capital need.
Can I have both a line of credit and a term loan at the same time?
Yes — many businesses run a line of credit for day-to-day working-capital flexibility alongside a separate term loan for a specific, larger purpose such as an equipment purchase or a property acquisition, with the two facilities serving genuinely different needs rather than overlapping.
Related products
Unsecured business loans — the better fit where a single lump sum for a specific purpose, rather than an ongoing revolving facility, is what the business needs.
Invoice finance — worth considering directly where the business's cash-flow gap is specifically tied to unpaid customer invoices rather than a general working-capital rhythm.
Short-term business loans — the closer match for a defined, one-off funding need with a clear exit, rather than an ongoing, revolving facility.