Business Lines of Credit in Texas
A business line of credit is a revolving credit facility that lets a business draw, repay, and redraw funds up to a set limit. Unlike a term loan, you pay interest only on the outstanding balance. Lines of credit are used for ongoing operating expenses, cash flow gaps, and short-term needs where the amount required varies month to month.
- Credit limit: $25,000 to $2,000,000 for most business lines of credit
- Structure: revolving — draw, repay, and redraw as needed up to the limit
- Interest: charged only on drawn balance, not the full credit limit
- Annual renewal: most business lines require annual review and renewal
- Minimum time in business: 2 years for most bank lines; 12 months for some alternative lenders
Overview
A business line of credit functions like a standing reserve of capital. Once approved, the business can draw funds at any time up to the credit limit, repay them at any time, and draw again. Interest accrues only on the amount outstanding — not on the unused portion of the line.
This flexibility makes lines of credit the preferred working capital tool for businesses with variable cash needs: seasonal operations that experience predictable highs and lows, service businesses with uneven billing cycles, distributors and wholesalers managing inventory purchases between receivable collections.
Bank lines of credit in Texas typically require two or more years of operating history, a strong credit profile (business and personal), existing bank relationship, and collateral — often a blanket lien on receivables and inventory, or a specific pledge of liquid assets. In exchange, bank lines offer the lowest rates available in the working capital market.
Non-bank lines of credit have emerged from online lenders and specialty finance companies. These products are approved more quickly, require less documentation, and are available to businesses earlier in their operating history — but at higher rates than bank lines and with lower credit limits.
The annual renewal requirement is a material feature of business lines of credit that is often underestimated. Most lines require annual review: the lender re-underwrites the business based on current financials. A business whose revenue or profitability has declined since the last renewal may see the line reduced or not renewed. This creates a business planning consideration that term loans do not have.
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Frequently Asked Questions
How is a business line of credit different from a business credit card?
A business line of credit is a commercial lending product with higher limits, lower rates, and more formal underwriting than a business credit card. Lines of credit can fund payroll, large invoices, and operational expenses that would exceed credit card limits. They are also typically cheaper than credit cards for extended balances.
Is a business line of credit secured or unsecured?
Most business lines of credit from banks are secured with a blanket lien on business assets or a pledge of specific collateral. Some online lenders offer unsecured lines at higher rates. Personal guarantees are typically required regardless of whether the line is secured.
What happens if my line of credit is not renewed?
If the lender does not renew the line, the outstanding balance must be repaid according to the line agreement — often within 30–90 days. This is a material risk that businesses drawing heavily on their line should plan for by maintaining the ability to repay if renewal is denied.
Can I use a business line of credit for equipment purchases?
Technically yes, but it is not the best use. Lines are designed for short-term needs and carry higher rates than equipment loans for the same credit profile. If you need equipment, an equipment loan will generally offer better terms than drawing on a line of credit for the same purpose.
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Page last updated: August 2026