Compare finance types
Line of credit vs Trade finance: which is right for your business?
The main difference between a business line of credit and a trade finance is how they are secured and repaid: a business line of credit suits seasonal or project-based businesses managing cash-flow timing, while a trade finance suits importers, wholesalers and distributors with proven sales and reliable suppliers.
Line of credit vs Trade finance at a glance
| Business line of credit | Trade finance | |
|---|---|---|
| What it is | A business line of credit is an approved limit you can draw on, repay and redraw as needed, paying interest only on the amount used. It suits businesses whose funding needs rise and fall through the year. | Trade finance is a revolving facility that pays your suppliers for goods at the time of order and gives your business 60–180 days to repay, bridging the gap between paying for stock and being paid for it. It covers both imported and domestic purchases. |
| Amount | $10,000 – $500,000 | $50,000 – $5,000,000 |
| Term | 6–24 months | 2–6 months |
| Indicative rate | 11.5% – 24% p.a. | 9% – 20% p.a. |
| Rate type | Variable | Variable |
| Security | Unsecured (guarantee may apply) | Secured by receivables |
| Repayments | Weekly or monthly minimums on the drawn balance | Each drawdown repaid in full at the end of its term |
| Typical speed | 1–3 business days | 1–3 weeks to establish, then 24–48 hours per drawdown |
| Best for | Seasonal or project-based businesses managing cash-flow timing | Importers, wholesalers and distributors with proven sales and reliable suppliers |
| Consider the other if | A single large purchase you will repay over years | Service businesses with no stock, or one-off purchases that do not justify a facility |
| Tax | Interest and line fees on business use are generally deductible. | Interest and facility fees on trade borrowing are generally deductible. Confirm with your accountant. |
Rates shown are indicative ranges observed across our lender panel for the period stated. They are not an offer or quote. Your rate depends on your business, the lender, the amount, the term and the security offered. The lender makes the final credit decision.
When to choose a business line of credit
A business line of credit is usually the better fit for seasonal or project-based businesses managing cash-flow timing. Its main advantages are pay interest only on what you draw, redraw without reapplying, buffer against slow-paying customers. Consider the alternative if a single large purchase you will repay over years.
When to choose a trade finance
A trade finance is usually the better fit for importers, wholesalers and distributors with proven sales and reliable suppliers. Its main advantages are pay suppliers upfront and often negotiate better pricing, revolving limit recycles with each repayment, works alongside invoice finance to cover the full cycle. Consider the alternative if service businesses with no stock, or one-off purchases that do not justify a facility.
Business line of credit
A business line of credit is an approved limit you can draw on, repay and redraw as needed, paying interest only on the amount used. It suits businesses whose funding needs rise and fall through the year.
Trade finance
Trade finance is a revolving facility that pays your suppliers for goods at the time of order and gives your business 60–180 days to repay, bridging the gap between paying for stock and being paid for it. It covers both imported and domestic purchases.