Mossdale Lending Group, a small-business funding broker in Pasco, Washington, explains business lines of credit: a limit you draw against when costs land, paying interest only on the drawn balance. This page covers draws, repayment, revolving and non-revolving lines, collateral, and how a line compares with a credit card or a term loan. Partners decide.
| Structure | An approved limit with draws and repayments |
|---|---|
| Interest | Accrues only on the part you have drawn |
| Revolving line | Paid-down room opens up again |
| Non-revolving line | Each draw permanently uses part of the limit |
| Partners review | Deposits, open invoices and credit record |
| Who decides | The lending partner |
Draws, balances and repayment
It starts with a ceiling the partner sets. When a cost comes up, you draw part of it, usually by transfer into your business checking account, and that amount becomes your balance. Interest runs on the balance, not on the unused limit. Payments may be interest only for a period, or interest plus a share of principal; the agreement sets which.
Many lines also carry a maintenance or draw fee and a review date when the partner looks at the account again and may renew, change or close the line. Ask about both before signing.
Revolving or non-revolving
On a revolving line, every dollar you repay becomes available again, so one line can cover the same kind of gap over and over. On a non-revolving line, each draw permanently uses part of the limit; once you have drawn it all, the line is spent even after you repay. Revolving lines suit repeating gaps. Non-revolving lines suit a known series of costs, such as phases of a project.
Secured or unsecured lines
A secured line is backed by collateral: receivables, inventory, equipment or a general lien on business assets, usually recorded with a UCC filing. An unsecured line names no specific collateral, though a partner may still ask for a personal guarantee. Secured lines often come with larger limits; unsecured lines put more weight on deposits and credit history.
Check what the lien covers. A blanket lien can make it harder to finance a machine or inventory separately later.
Repeating gaps in Tri-Cities businesses
In ZIP 99301, which includes Pasco, construction led with 359 employer establishments in 2023, followed by retail trade (209) and health care and social assistance (179) (U.S. Census Bureau, County Business Patterns 2023, ZIP Business Patterns). Each of these has gaps that tend to repeat: contractors pay crews before progress payments, shops pay suppliers before goods sell, clinics pay wages while claims are processed.
A line of credit fits these patterns when the gap closes on its own. If the balance never comes down between draws, the line is financing a shortfall rather than a timing gap, and a term loan or a hard look at margins may be the better step. The industry overview shows how each sector tends to use these tools.
A line of credit, a credit card or a loan
| Feature | Line of credit | Business credit card | Term loan |
|---|---|---|---|
| How money arrives | Draw to your bank account | Card purchases | One lump sum |
| Interest | On the drawn balance | On balances carried past the grace period | On whatever principal remains |
| Best suited to | Repeating gaps; wages, suppliers | Small, frequent card-accepted purchases | One-time projects and assets |
| Reusable | Yes, if revolving | Yes | No |
Owners comparing a loan with a card should price both for the balance they actually expect to carry and the time it will take to clear it. A working capital advance is another way to cover a single gap.
Drawing on a line for wages
Wages are one of the most common draws, because payroll does not wait for receivables. Partners generally accept it, provided deposits show the line being paid back between payrolls. Our post on payroll funding options in Pasco, WA compares a line with working capital and an advance for that exact problem.
For every option on one page, see all six compared; for county figures, the Franklin County picture; for the steps from a call to an answer, how it works.
Three figures that set a line's real cost
Three numbers decide what a line really costs: the rate on drawn balances, the fees charged to keep the line open or to draw on it, and the minimum payment rule. Ask the partner to show a month with a typical draw, so you can see interest and fees in dollars rather than as percentages on a term sheet.
Keeping a line healthy
- Use draws to bridge timing, never to cover losses.
- Pay the balance down when the related payment clears.
- Track the review date and keep statements tidy before it.
- Avoid stacking an advance on top of a drawn line.
By Mossdale Lending Group · Updated