Business line of credit lenders: draw-down facilities compared

Choose business line of credit lenders by how the facility is built, then by cost. Our guide to the revolving credit facility explains the product itself: a limit you draw on, repay and draw again. Before comparing prices, check five things:

• Structure. A true revolving limit, a draw-down loan with a fixed term, or a facility that pays suppliers’ invoices for you.
• Limit and term. Whether the limit fits your largest likely gap, and how long the facility runs before it must be renewed or repaid.
• What secures it. A personal guarantee, your invoices, or property.
• Fees on undrawn money. Some facilities charge a non-utilisation or commitment fee on the part you do not use.
• Commitment. Whether the lender can reduce or withdraw the limit at review or at any time.

The table shows each lender’s line of credit or draw-down product in its own published words, from its profile in our directory of UK business lenders. Lenders are listed in alphabetical order.

A lender’s terms can change after the date shown, so check its own pages before relying on a figure. Most do not publish their rates or fees.

These notes come from each lender’s profile, which records its own published terms.

• Bizcap publishes a line of credit of up to £500,000 that lets you draw funds as needed and pay for what you use. Its page does not set out repayment, security or eligibility for this product.
• Credit4’s Flexible Funding Facility is £15,000 to £30,000 over 3 to 12 months. You can draw, repay and redraw during the term, interest is payable fortnightly on drawn funds, all capital must be repaid by the end of the term, and guarantors are required.
• Funding Circle’s FlexiPay line of credit is £1,000 to £250,000, with each amount you use repaid over 1, 3, 6, 9 or 12 months.
• iwoca’s Flexi-Loan is £1,000 to £1 million over one to five years, repaid by a set amount each month, with interest charged only on what is drawn.
• Lenkie offers an uncommitted revolving facility of up to £1 million. Lenkie pays your supplier invoices and you repay each one over 1, 3, 6, 9 or 12 months, with each repayment restoring your available balance.
• One Stop Business Finance describes revolving credit facilities you draw and repay as required, paying interest only on what you use, but publishes no limits. It says its own-book lending always requires a personal guarantee.
• Signature Property Finance offers a revolving credit facility of £100,000 to £1.5 million for 12 months, secured on unencumbered property at up to 50% of open market value for commercial and 70% for residential, available through professional intermediaries only.
• TP24’s CreditLine is £250,000 to £5 million, backed by your receivables, with the limit moving as eligible receivables grow. It says you pay interest only on what you draw and that it takes no personal guarantee or floating charge.

A line of credit can carry three kinds of charge, and lenders mix them differently. Ask each lender for all three in writing:

• Interest on drawn funds. Usually calculated daily on what you owe. Credit4, iwoca, One Stop and TP24 all say interest is charged only on what you draw.
• Arrangement or renewal fees. A fee to set up the limit, sometimes charged again each time it is renewed.
• Non-utilisation or commitment fees. A charge on the part of the limit you have not used. Not every facility has one.

A bank overdraft shows how these charges can be published. NatWest’s business overdraft page says interest is calculated daily on the end-of-day balance and charged quarterly, and its arrangement fee runs from £50 on limits of £500 and under to 1.5%, with a minimum of £150, on limits of £5,001 and above. It says the overdraft is available over 12 months. Our business overdraft guide compares overdrafts with other facilities.

Most lines of credit run for a set period and are then reviewed, renewed or repaid. Signature Property Finance’s facility runs for 12 months, Credit4’s for 3 to 12 months, and iwoca’s Flexi-Loan for one to five years. At review, a lender may keep the limit, change it, reprice it or decline to renew.

Some facilities can change sooner. Lenkie describes its facility as uncommitted, which generally means the lender is not obliged to fund each drawing. A receivables-backed limit such as TP24’s moves with your eligible invoices, so it can fall if your sales ledger shrinks.

Eligibility varies by lender and is subject to status and lender criteria. Lenders mostly look at trading history, turnover, bank statements and the credit history of the business and its directors. Personal guarantees are common on unsecured facilities: Credit4 requires guarantors, and One Stop says its own-book lending always requires one.

Regulation also depends on the borrower and amount. Under the Regulated Activities Order, credit of more than £25,000 entered into wholly or predominantly for business purposes is exempt from consumer credit regulation. A sole trader or small partnership borrowing £25,000 or less may have a regulated agreement. This is general information, not legal advice.

If your facility is meant to cover day-to-day cash needs, our guide to a working capital loan covers when a term loan may suit better.

• A bank overdraft on your current account, for small and frequent gaps.
• Invoice finance, if the gap comes from customers taking time to pay.
• A short-term business loan for a single known cost.
• Supplier credit, by negotiating longer payment terms.

Capzy is a credit broker, not a lender, and the lender pays us when a facility completes. We describe lenders from their own published terms and do not rank them. You can check your funding options with a soft search that does not affect your credit score. A lender’s full application may use a hard search.