A business line of credit is a revolving credit facility that lets you draw funds up to a pre-approved limit, repay, and redraw – paying interest only on what you use. UK providers include iwoca, Funding Circle FlexiPay, Tide, and bank overdraft facilities. Unlike a term loan, a line of credit is designed for recurring working capital needs: covering payroll gaps, managing seasonal cash flow, or funding stock purchases. It is the most flexible form of business borrowing available in the UK.
- Credit limits reach £1 million - Top providers like Funding Circle offer substantial borrowing capacity for established businesses with strong credit profiles
- Interest rates from 6.9% annually - Best rates reserved for businesses with 2+ years trading history & excellent credit scores
- Overdrafts cost 15-39% more - Business lines of credit typically offer lower rates than traditional bank overdrafts for similar borrowing amounts
- Setup fees range £0-£500 - Fintech lenders often waive arrangement fees while traditional banks charge upfront costs for credit facilities
- 12-month minimum trading required - Most providers demand established business history though some alternative lenders accept 6-month track records
What Is a Business Line of Credit?
A business line of credit is a revolving credit facility with a set credit limit. You draw funds as needed, repay (with interest), and the repaid amount becomes available again. Interest accrues only on drawn balances – not the full limit. In the UK, lines of credit are offered by alternative lenders (iwoca, Tide, Funding Circle) and banks (overdrafts, revolving credit facilities). They differ from business loans in that there is no fixed repayment schedule and no obligation to draw the full amount.
Business Line of Credit vs Business Overdraft
Business overdrafts (offered by banks) and business lines of credit (offered by alternative lenders) are functionally similar but differ in key ways: overdrafts are linked to your business bank account and accessed via debit card or payment; lines of credit are separate facilities accessed by drawing to your account. Overdraft rates are typically higher (around EAR 10–20%); lines of credit from alternative lenders charge flat daily or weekly rates (iwoca charges 0.1–0.15% per day drawn). Alternative lines of credit are typically available faster (24 hours vs 2–4 weeks) and accessible without an existing bank relationship.
| Feature | Business Overdraft | Business Line of Credit |
|---|---|---|
| Provider | Your business bank | Alternative lender (iwoca, Tide, etc.) |
| Limit | £1,000–£50,000 (typical) | £1,000–£500,000 |
| Rate | EAR 10–20% + arrangement fee | Daily rate (e.g. 0.1–0.15%/day) |
| Application | Via your bank; 2–4 weeks | Online; decision in hours |
| Requires existing bank account? | Yes | No |
| Min. trading history | 12+ months (most banks) | 3–12 months (varies by lender) |
| FCA regulated | Yes | Yes (if consumer; varies for B2B) |
Best Business Lines of Credit UK 2026
The best UK business line of credit providers in 2026 are: iwoca FlexiCredit (£1,000–£500,000, 0.1–0.15% daily rate, 12-month facility, 24-hour approval – the UK market leader with 90,000+ businesses funded), Tide Instant Cashflow (up to £500,000, Tide account holders only, instant access), Funding Circle FlexiPay (BNPL-style for supplier payments, not a true revolving credit), and NatWest/HSBC/Barclays business overdrafts (for established customers with existing accounts). For most SMEs needing fast, flexible access, iwoca FlexiCredit is the benchmark product.
Business Line of Credit: Eligibility and Costs
Eligibility for a UK business line of credit varies by provider: iwoca requires 3+ months trading (open banking data used for assessment), Tide requires an existing Tide account and 3+ months trading, Funding Circle requires 12+ months trading. Costs are expressed differently: iwoca charges 0.1–0.15% per day on drawn balances (equivalent to approximately 36–54% APR on drawn funds, but rarely applicable if you repay within days or weeks). Bank overdrafts charge an arrangement fee (0.5–2% of limit) plus an EAR of 10–20% on the drawn balance plus a monthly usage fee. Always calculate total cost per draw based on your expected usage pattern.
- Best Business Loans UK 2026 – full lender comparison including term loans and revolving facilities
- Working Capital Finance UK – all options for bridging cash flow gaps
- Unsecured Business Loans – no-security term lending for established businesses
- Business Loans for Bad Credit – options when traditional lenders decline
- Short-Term Business Loans UK – lump-sum borrowing for immediate needs
Compare all your funding options in our comprehensive guide to UK business loans. For a full breakdown of what you will pay, see our guide to business loan costs and interest rates.
