Banking
Line of Credit (Working Capital)
Quick definition
Revolving credit facility lets a startup borrow up to a limit, repay, and re-borrow — used for short-term working capital needs.
A line of credit gives access to revolving capital — borrow up to the limit, pay it back, borrow again. Pricing: interest only on drawn amount, usually prime + 1-4%. Often secured by accounts receivable or inventory. Useful for managing seasonal cash flow or bridging AR collection delays. Distinct from a term loan (lump-sum drawn upfront, paid over time). Available from traditional banks and fintech lenders (Pipe, Capchase, Stripe Capital).
Related banking terms
Treasury Management
The discipline of managing a company's cash, liquidity, banking relationships, and short-term investments.
Sweep Account
Bank arrangement that automatically transfers excess cash from a checking account into a higher-yielding investment account.
FDIC Limits ($250K)
Federal Deposit Insurance Corporation insurance covers $250K per depositor per FDIC-insured bank per ownership category.
Money Market Fund
Mutual fund holding short-term, highly liquid debt (T-bills, commercial paper, repos) targeting stable $1/share value plus yield.
Frequently asked questions
- What is Line of Credit (Working Capital)?
- A line of credit gives access to revolving capital — borrow up to the limit, pay it back, borrow again. Pricing: interest only on drawn amount, usually prime + 1-4%. Often secured by accounts receivable or inventory. Useful for managing seasonal cash flow or bridging AR collection delays. Distinct from a term loan (lump-sum drawn upfront, paid over time). Available from traditional banks and fintech lenders (Pipe, Capchase, Stripe Capital).
- Why is Line of Credit (Working Capital) important for startups?
- Line of Credit (Working Capital) is a banking concept that matters for startup founders because it directly affects fundraising readiness, financial decision-making, or operational discipline at the stage where mistakes are expensive to undo. Founders who understand it have a meaningfully easier time in diligence, board meetings, and investor conversations.
- What category does Line of Credit (Working Capital) belong to?
- Line of Credit (Working Capital) is a Banking term in the StartupCFO finance glossary — alongside other banking concepts that founders, CFOs, and accountants use in daily startup operations and reporting.
- Where can I learn more about Line of Credit (Working Capital)?
- Beyond this definition, see the related banking terms below, or explore StartupCFO's insights and tools that put Line of Credit (Working Capital) in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
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