A line of credit is a common financial product that underwrites you for a certain credit limit. You can draw up to the maximum credit limit. Repayment often begins immediately after the funds are drawn. Many lines of credit are revolving, meaning that with each weekly repayment, the amount you repaid (minus the fees) becomes available again (within the credit limit and the timeframe outlined in their agreement if one is specified). Many small businesses use lines of credit as working capital or as a source of growth capital, especially when cash flow is tight.
Lines of credit are popular because of their flexibility. You can draw funds whenever you want, use them however you want, and draw the exact amount you want. This is important because you don't need to take on a huge term loan and make interest payments on more money than you need. A line of credit can also be useful for small businesses to have as an emergency source of working capital, used when something unexpected comes up.
Sometimes the flexibility of a line of credit comes with a price. Some lenders will charge you origination fees (a fee for entering into the loan agreement), maintenance fees (fees to keep the line of credit open when you're not using it), draw fees (a one-time fee you pay on top of the interest rate), and bank wire fees.
There are no standard credit scoring tools for small businesses. Enterprises have Moody's or Standard & Poor's rating services. Consumers have personal credit. But small businesses don't have either, so pretty much all small businesses end up using personal credit to get approved for a line of credit. You might find this problematic for three reasons: 1) you might want to keep your personal and business finances separate, 2) you might have low personal credit—though your business might be healthy—which could disqualify you, or 3) you might not want a hard pull on your credit report for fear it will affect your credit score.
Fundbox goes in a different direction with our line of credit product. We don't require personal credit to get started. We use a custom-built business health assessment to determine your credit eligibility and limit by reviewing the data you share with us. You only need to connect your business bank account—nothing else. Simple.