I get asked this question a lot: What is the difference between a line of credit and a revolving line of credit? They are very similar, but there is one big difference from a lifespan standpoint.
If you arrange a line of credit with a lender, it’s a one time arrangement for a specific period of time. Once you pay it off, it’s over. A revolving line of credit, on the other hand, stays open until one party or the other deems it over. In both cases, you are provided funds up to a certain credit limit and you can use and pay back those funds at your discretion. You have a lot of flexibility in either case, but a revolving line allows you to borrow and repay the monies over and over again, up to a certain limit.
In any case, the amount of credit line a lender will grant you will depend upon your credit score, income and credit history. Most businesses use a line of credit to finance expansion, but my philosophy is to not wait until you need it. Arrange a line of credit when times are good (and you quality for the largest amount), draw down the minimum amount to keep it active and have the comfort of knowing it’s there if and when the time arises that you really need it.