How a working capital line differs from a lump-sum loan
A lump sum is funded once and repaid on a schedule. A line gives you a limit to draw from repeatedly, and you pay only on the balance outstanding.
With a term loan you receive the full amount on day one and begin repaying it all. With a line of credit you might be approved for $100,000 and draw $18,000 this week. Costs apply to the $18,000, not the full limit.
That structure matters for businesses whose needs rise and fall. A landscaper buying materials in spring, a distributor waiting on 45-day invoices, or a shop bridging payroll during a slow month all use money for a while, then return it.
Repayment is usually weekly or monthly on the drawn balance. Some lines also charge a draw fee, a monthly maintenance fee, or an annual fee, so read the fee schedule closely.
A payback example with round numbers
Compare the cost of a draw to the profit the draw produces. If a $20,000 draw lets you fill a job worth $35,000 in revenue, the fee is only part of the story.
This example is illustrative, not an offer. Suppose a restaurant supply reseller wins a large order. It needs $20,000 of stock up front and will be paid in 30 days.
| Line item | Amount |
|---|---|
| Draw for inventory | $20,000 |
| Draw fee and cost over 60 days | $1,400 |
| Revenue from the order | $32,000 |
| Gross profit on the order | $9,000 |
| Profit after line cost | $7,600 |
The $1,400 buys $9,000 of gross profit that would have been declined without the cash. That is the test: does the money produce more than it costs, and by when? If the answer is unclear, shrink the draw.
What a working capital line should and should not fund
Use it for short-cycle, self-liquidating costs. Avoid using it for long-term assets that take years to pay back.
Good uses share one trait: the cash comes back within weeks or a few months.
- Payroll covering a gap before receivables arrive.
- Inventory ahead of a busy season, see seasonal business loans.
- Supplier deposits and bulk-purchase discounts.
- Tax payments or insurance premiums due before revenue lands.
Poor uses are long-term assets such as a vehicle or heavy machinery. A multi-year asset financed with money you must clear in months creates a permanent squeeze. Equipment financing matches the repayment period to the asset's useful life.
Who qualifies
Funders look mostly at revenue, time in business and bank-statement health. Personal credit matters, but it is rarely the only factor.
Lines of credit typically ask for steady deposits, a track record of several months, and balances that do not routinely hit zero. Owners are often asked for a personal guarantee. That means you are personally responsible if the business cannot repay, so read that clause before signing.
ROI Funder considers files with 500+ FICO, 6+ months in business and $20,000+ in monthly revenue. Line-of-credit decisions typically come in 24 to 72 hours, depending on documentation. Lines for businesses with stronger credit and longer history generally have lower costs and higher limits. Lines for newer or lower-credit businesses are usually smaller and more expensive.
For deeper reading on structure, see the guides on line of credit fees and how interest works.
Pros and cons at a glance
Lines are flexible and efficient for repeating gaps, but fees and variable costs can add up if the balance sits for months.
Advantages
- You pay only for money you use.
- Funds are available again after you repay, with no new application each time.
- Responsible use can build business credit history.
Drawbacks
- Fees can include maintenance, draw and renewal charges.
- Limits can be reduced or frozen at review time.
- It is easy to treat the limit as permanent money, carrying a balance for months instead of cycling it.
A simple discipline helps: set a payoff date before each draw and write down what the draw will generate.
Getting a working capital line through ROI Funder
Apply online in minutes with a soft credit pull. We match you to funders in our network and show the true cost of each option before you decide.
Share the application and three months of business bank statements. If a line is the best match, we show the limit, fees, and an estimated monthly-equivalent cost of typical usage. If a different structure fits better, such as working capital or revenue-based financing, we show that too.
Funding ranges from $5,000 to $5,000,000. There is no obligation to accept any offer. Start with the application.
Frequently asked questions
What is the difference between working capital and a line of credit?
Working capital is the cash you use to run daily operations. A line of credit is one product that supplies it, revolving as you draw and repay.
Do I pay interest on the whole limit?
Usually no. Cost applies to what you draw, though some lines also charge fees tied to the limit, such as annual or maintenance fees.
Can I get a line with a 500 credit score?
ROI Funder considers files with 500+ FICO, but lines for lower scores tend to be smaller and cost more. Revenue and bank-statement health carry heavy weight.
How fast can I draw funds?
Line decisions typically take 24 to 72 hours. After the line is open, draws are usually faster than a new application.