When you walk into a bank to ask about a commercial line of credit, you’ll usually hear the basics: it’s flexible, it gives you access to working capital, and you only pay interest on what you use. Sounds great, right?
But what they often don’t tell you are the important details—things that can affect your cash flow, your borrowing power, and even your ability to grow.
In this article, we’ll walk you through what banks tend to gloss over, and what you really need to understand before committing to a commercial line of credit.
Table of Contents
- What Is a Commercial Line of Credit?
- The Pros—and the Fine Print
- What Banks Don’t Tell You
- How Brokers Offer a Better Deal
- Key Takeaways and Next Steps
What Is a Commercial Line of Credit?
A commercial line of credit is a revolving loan that gives your business access to funds up to a set limit. You can draw down money as needed and repay it as your cash flow allows.
Common uses include:
- Covering short-term cash flow gaps
- Paying suppliers
- Managing seasonal revenue fluctuations
- Funding urgent repairs or inventory
You only pay interest on the amount you use, not the full approved limit—similar to a credit card, but designed for business.
The Pros—and the Fine Print
At face value, a line of credit can be a great tool. It’s flexible, reusable, and fast to access once in place. But there are some catches that don’t always make it into the bank’s sales pitch.
Pros:
- Ongoing access to funds
- Only pay for what you use
- Can support healthy cash flow
- Quick top-up options once approved
But the fine print may include:
- Review clauses: Banks can reassess or reduce your limit at any time, especially if your financials change.
- Fees on unused limits: You might be charged fees even if you’re not drawing down funds.
- Hidden costs: Monthly account fees, setup costs, early repayment charges, and line renewal fees can add up.
- Security requirements: Some banks will secure the line against your property or business assets—even for relatively small amounts.
- Short-term terms: Some lines are subject to annual renewal, which creates uncertainty for long-term planning.
What Banks Don’t Tell You
Here’s what often gets left out of the conversation:
1. Your Limit Isn’t Guaranteed
Just because you’ve been approved doesn’t mean your limit is safe forever. Banks regularly review your financials and can reduce or cancel the line if your revenue dips or if your industry is deemed higher risk.
2. It’s Still Debt
Some business owners treat lines of credit as “just-in-case” buffers—but it’s still borrowed money. Using it consistently to plug recurring shortfalls can lead to overdependence.
3. It Affects Borrowing Power
Even if you haven’t drawn on the full amount, the total approved limit may be considered a liability by other lenders. That could impact your ability to secure additional funding.
4. It May Be Harder to Refinance Later
If you become too reliant on your line of credit or struggle with repayments, switching to a better finance product later can become difficult. Lenders might see your business as higher risk.
5. You Might Not Be Getting the Best Deal
Banks usually only offer their own products—not the full market. That means you could be missing out on better rates, lower fees, or more flexible terms from alternative lenders.
How Brokers Offer a Better Deal
Unlike banks, brokers work for you—not a single institution. At Capital Plus Finance, we compare commercial line of credit options from over 40 lenders to find the right fit for your business needs.
A broker can help you:
- Compare interest rates and fee structures side-by-side
- Negotiate better terms, including lower setup or renewal fees
- Find lenders who understand your industry and business model
- Avoid unnecessary security requirements or over-collateralisation
- Explore alternative products, such as equipment finance or term loans, that might serve your goals more effectively
We take the guesswork out of business finance—so you can focus on growing, not decoding loan documents.
Key Takeaways and Next Steps
A commercial line of credit can be a helpful tool—but only when you understand the full picture. Before signing on the dotted line:
✅ Read the fine print (especially around fees, reviews, and security)
✅ Think about whether you need short-term cash flow support or longer-term funding
✅ Consider how the facility fits with your overall business strategy
✅ Speak to a broker who can explain your options in plain English
Looking for clarity on your business finance options?
Talk to Capital Plus Finance today—we’ll help you find a smarter, more transparent solution that works for your business.
