Business line of credit: money on tap, explained

At a glance

• A line of credit gives you a limit to draw from, repay and draw again
• You generally pay interest only on what you've actually drawn
• It suits seasonal, lumpy or unpredictable cash flow
• A term loan gives one lump sum for a one-off need
• Our form helps match you with options that give flexible access to funds
• A free enquiry that leaves your credit file untouched

How does a business line of credit in NZ work?

A business line of credit in NZ works like a reservoir of funds your business can dip into. You're approved for a limit. You draw some when you need it. When cash comes back in, you repay it, and that amount is available to use again.

That's what "revolving" means: the credit keeps turning over. You're not stuck with a lump sum sitting in your account, and you're not reapplying every time a gap appears.

Here's a simple illustration. Say your limit is $30,000. You draw $10,000 to pay a supplier. Your available balance drops to $20,000. A fortnight later, a customer pays and you repay the $10,000. Your full $30,000 is available again.

How is revolving credit different from a term loan?

The biggest difference is shape. A term loan is a single payout with a set repayment schedule. A line of credit is flexible, used and repaid as you go.

Neither is "better". They're different tools. A new excavator is a term loan job. Covering payroll while you wait on 60-day invoices is where revolving credit shines.

What about a business overdraft?

An overdraft is a cousin of the line of credit. It's attached to your everyday transaction account, so you simply spend below zero up to an agreed limit. A line of credit is usually a separate facility you draw from. Both give flexible access; the right one depends on how you run your cash.

When does flexible access to funds make sense?

Revolving credit is at its best when cash flow is uneven. Common situations include:

• Seasonal trade. A Canterbury agricultural contractor who's flat out in summer and quiet in winter.
• Slow-paying customers. A Wellington IT consultancy waiting 30, 60 or 90 days on invoices.
• Stock cycles. An Auckland homewares retailer ramping up before Christmas.
• Project-based work. A Tauranga builder funding materials before each progress payment arrives.
• Tax timing. Smoothing out GST returns and provisional tax dates so they don't collide with a quiet month.

If your needs are ongoing rather than one-off, a revolving approach can save you applying for funding over and over.

How do we help you find the right fit?

The honest answer: it depends on your business. Not every business suits a revolving facility, and not every lender offers one in every situation. That's why our form doesn't push you towards a single product.

Instead, you tell us what you're trying to solve, and a real person matches you with options that give the flexible access you're after. Depending on your circumstances, that could look like:

1. An unsecured cash-flow option assessed mostly on your business bank statements, usually for businesses with an NZBN and at least six months of trading
2. A property-secured option using equity in your home, investment property, commercial property or land, from $20,000 to $1 million with no financials needed
3. A short-term loan sized to the gap, which can do the same job as a line of credit when the need has a clear start and end

The goal is simple: just the credit your business needs, in the shape that suits how your cash moves.

How should you think about your limit?

Bigger isn't always better. A sensible limit covers your realistic peak need with a bit of breathing room, without tempting you into funding things that don't earn their keep.

A few questions to ask yourself:

• What's the biggest gap between money out and money in over a typical year?
• How long does that gap usually last?
• Which months are tightest, and why?
• What would you use the funds for, specifically?
• How quickly would the drawn amount be repaid?

Having rough answers ready makes the conversation with a lender much quicker, and helps them size things properly.

What do lenders look at for flexible business funding?

It comes back to the pathway.

Without property, lenders focus on your bank statements: regular deposits, how balances behave, dishonours and existing loan repayments. Weaker credit can be considered if your cash flow supports repayments. Our page on unsecured business loans covers this route in detail.

With property, the equity and your exit plan matter most. Credit hiccups are considered case by case, and there's no need for tax returns or financial statements.

How can you use revolving credit wisely?

Flexible funds work best with a bit of discipline. A few habits that keep revolving credit working for you:

• Use it for short-term gaps, not long-term purchases like vehicles or property
• Repay drawn amounts as soon as the matching income arrives
• Keep an eye on your drawn balance each month
• Don't treat the limit as spare income

Used this way, a revolving facility becomes a buffer that smooths out the bumps rather than a debt that quietly grows.

Is a line of credit or a working capital loan better?

If your cash gap is ongoing and repeats through the year, revolving credit often makes more sense. If it's a one-off gap with a clear end, such as covering costs until a big contract pays, a fixed working capital loan can be simpler. Our guide to working capital loans walks through that option.

Not sure which fits? That's what the call back is for.

Ready to find your flexible funding?

One short form, no cost, and zero impact on your credit score. Tell us how your cash flow works and what you need, and a real person will come back fast with the options that match. For the bigger picture, see our simple guide to business loans in NZ.

Frequently asked questions