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Line of Credit (LOC): Things You Need to Know

Line of Credit (LOC): Things You Need to Know

Written and published by
ET Wu

A business line of credit (LOC) is a revolving loan that gives you access to a fixed amount of funds. Within the approved credit limit, you can withdraw money as you need, and pay interests only on the amount borrowed. Once repaid, that amount becomes available for you to use again.


For e-commerce sellers, a business line of credit gives you quick access to funds, which can be used to meet short-term working capital needs such as:

  • Inventory purchase
  • Advertising
  • New hires
  • New product launches‍

Pros and cons of business lines of credit


Advantages Explanation
Flexible borrowing A line of credit works like a credit card, allowing you to borrow against a credit limit from time to time.
There is no need to apply for a loan every time you need extra money.
Help build
business credit
Building good business credit is important in many ways. It increases the chances of your company being approved for loans, getting higher loan amounts, lower interest rates and negotiating better payment terms with suppliers.
However, business credit takes time to build. Applying for a business line of credit and making repayments on time is a good way to boost your business credit.

Disadvantages Explanation
Low borrowing limits In business lines of credits, there is a limit to the maximum amount of funds you can draw. The borrowing limit is usually lower than that in other lending options.
Extra charges and fees In addition to interest, you may be charged other fees on your business line of credit, such as account set-up fees, annual fees, transaction fees, late payment fees, etc.
Complicated application procedures To apply for a business line of credit, there is a lot of documentation to submit. It could take weeks or months to prepare all of your company’s historical financial statements, tax returns, business planning reports, etc.
Regular reviews may also be conducted to continually assess your eligibility for a business line of credit.
Long turnaround time The approval process could take months.
Difficult to qualify Your company must be in business for a certain period of time (e.g. 2 years or more) in order to be eligible for a business line of credit.

About Choco Up

Choco Up is a global technology and financial services platform, offering revenue-based financing and business growth solutions for digital merchants and startups.


With data analytics and machine learning at its core, Choco Up employs vast integrations to automate fund deployment, providing fast-growing companies with zero-equity funding in a quick and seamless manner.


We currently have offices in Singapore and Hong Kong and serve clients worldwide, providing smart-growth analytics and global payment solutions to fuel their growth.

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