60-70% of Our Volume Is Lines of Credit: What That Tells Me About How Small Businesses Actually Run

I’ve facilitated $375 million in financing since 2022. I’ve seen thousands of applications, reviewed countless business models, and funded businesses across dozens of industries. And here’s the stat that surprised me most when I actually ran the numbers:

60-70% of everything we fund is lines of credit.

Not term loans. Not equipment financing. Not SBA loans. Lines of credit – revolving facilities that businesses draw from and repay repeatedly.

When I started in this industry in 2013, the conventional wisdom was that businesses needed “real financing” – structured term loans with fixed payments and defined purposes. Lines of credit were considered supplementary products for managing occasional cash flow gaps.

The data from our actual funded deals tells a completely different story about how small businesses really operate versus how business school case studies suggest they should operate.

What the 60-70% Number Actually Means

Let me be clear about what I’m measuring. Of all new financing we close – equipment loans, term loans, SBA products, lines of credit, AR financing, everything – roughly two-thirds by dollar volume are revolving credit lines.

These aren’t small deals either. We’re funding credit lines from $50,000 to $5 million. The average line we close sits around $200,000-300,000. Businesses treat these as primary working capital vehicles, not emergency backup plans.

This wasn’t always the case. Five years ago, maybe 30-40% of our volume was lines of credit. The shift to 60-70% tells me something fundamental changed in how businesses think about capital and operations.

Why Businesses Choose Lines Over Loans: What They’re Actually Telling Me

Every funding application comes with a conversation. When I ask business owners what they need and why, patterns emerge.

“I don’t know exactly when I’ll need it, just that I will.” Seasonal contractors don’t know which weeks in March will be slow. Manufacturers don’t know which customers will order heavily which months. Retailers can’t predict exact inventory needs three months out.

Traditional loans force businesses to guess. “We need $200,000 for Q2 inventory” locks them into borrowing $200,000 whether they actually need $150,000 or $275,000. Lines let them borrow what reality demands rather than what forecasts predicted.

“I want to pay it back when the money comes in, not on a fixed schedule.” A contractor completes a $500,000 project in May but doesn’t receive final payment until July. They need $150,000 for materials and labor in April. With a traditional loan, they pay fixed monthly payments starting immediately. With a line of credit, they draw $150,000 in April, repay it when the July payment arrives, and pay interest only for those three months.

The flexibility converts what would be 36-60 months of debt service into 90 days of borrowing costs.

“Business isn’t predictable enough for fixed payments.” This is the one that really opened my eyes. Most small businesses don’t operate with the stability textbooks assume. Revenue swings 30-50% month to month based on seasonality, customer timing, economic conditions, and a dozen other factors beyond their control.

Fixed loan payments ignore this reality. $8,000 monthly payment is manageable when doing $400,000 revenue but crippling when doing $150,000. Lines of credit scale with actual business performance – borrow more during strong months, repay during weak ones, adjust naturally to reality.

The Seven Scenarios Driving Line of Credit Demand

After funding thousands of lines, I see the same situations driving demand repeatedly.

Seasonal businesses bridging revenue cycles. Landscapers crushing it May through October, slow November through April. Construction contractors busy spring through fall. Retailers preparing for holiday season. They all need capital deployed during slow/preparation periods, repaid from peak season revenues.

Traditional loans don’t match this cycle. Borrowing $250,000 in February, receiving revenue in June, but being locked into 36-60 months of payments makes no sense. Drawing $250,000 in February, repaying in July, paying interest only for those months – that matches business reality.

Accounts receivable gaps. Businesses completing work today but receiving payment in 30-90 days need working capital bridging the gap. I see this constantly with professional services, contractors, manufacturers, wholesalers – any B2B business with payment terms.

They don’t need permanent financing. They need temporary capital converting promises of payment into operational cash flow until actual payments arrive.

Opportunity capture. A supplier offers 20% discount on bulk materials if purchased this month. A distributor lands a major new customer requiring inventory investment. A service business can hire a star employee if they act immediately.

These opportunities don’t wait for loan applications to process. Lines of credit already in place enable immediate action.

Managing unpredictable expenses. Equipment breaks down. Key employees leave requiring replacement hiring and training. Unexpected tax liabilities emerge. Legal issues demand immediate attention.

Lines provide insurance against the reality that businesses face constant unexpected costs that can’t be predicted or budgeted perfectly.

Testing new initiatives. Launching a new product line, entering a new market, trying a new marketing channel – these all require capital but with uncertain returns. Businesses don’t want to commit to 5-year loan payments for experiments that might fail in 6 months.

Lines let them invest, test, and pull back quickly if initiatives don’t perform. They’re only paying for capital during the testing period, not locked into years of payments.

Growth that outpaces cash flow. This is perhaps the most common scenario I see. Businesses growing 40-50% annually generate great revenue but consume massive working capital. Growing from $2 million to $3 million revenue requires inventory increases, receivables expansion, hiring ahead of revenue – all creating cash strain despite strong performance.

Lines scale with growth naturally. As revenue increases, borrowing capacity grows. As growth moderates, lines get repaid and availability sits unused.

Multiple small needs versus one large need. Most businesses don’t need $200,000 all at once. They need $40,000 this month, $30,000 next month, $60,000 the month after. Traditional loans force lumpy all-at-once borrowing. Lines let them draw precisely what’s needed when it’s needed.

One application, multiple lenders lined up for you. Funding in 48 hours.

INTERESTED?

What This Tells Me About How Businesses Actually Operate

The 60-70% line of credit volume fundamentally changed how I think about business operations.

Small businesses operate with far less certainty than anyone acknowledges. When I ran my own business for 17 years, I experienced this daily. Revenue forecasts are educated guesses. Expense budgets are aspirational. Cash flow projections are scenarios, not certainties.

Financing products designed for predictable, stable operations don’t serve businesses operating in reality’s uncertainty. Lines of credit acknowledge and accommodate this uncertainty rather than pretending it doesn’t exist.

The gap between operational cycles and payment obligations creates constant tension. Businesses deliver value today, receive payment later. They incur expenses this month, generate revenue covering those expenses next quarter. Traditional financing ignores these timing gaps.

Lines of credit explicitly solve timing mismatches. They convert “I’ll have the money in two months” into “I have the money now” then reverse when payments arrive.

Flexibility is worth paying for. Lines of credit typically cost more than comparable term loans. Businesses choose them anyway – 60-70% of the time. They’re explicitly trading slightly higher cost for substantially more flexibility.

This tells me flexibility solves bigger problems than marginal cost differences. Being able to repay early, borrow only what’s needed, adjust to changing conditions – these capabilities create value exceeding the cost premium.

Most businesses don’t need one large capital infusion – they need ongoing access. The traditional business loan model assumes businesses have occasional capital needs. Borrow once, deploy, repay, done. The actual pattern I see is continuous capital needs. Manageable needs, but constant.

Lines provide ongoing access matching this operational reality. Businesses aren’t applying for new financing every few months – they’re drawing from existing capacity as needs arise.

The Industries Where Lines Dominate Versus Where Term Loans Still Work

Lines of credit aren’t optimal for every situation. The data shows clear patterns.

Lines dominate: Service businesses, seasonal businesses, project-based businesses, B2B companies with receivables, distributors and wholesalers, growing companies, businesses with variable monthly revenues.

All share the common factor: unpredictable cash flow timing requiring flexible capital deployment.

Term loans remain strong: Equipment purchases, real estate acquisition, facility improvements, business acquisitions, debt consolidation, major one-time investments with clear ROI timelines.

All share the common factor: specific purposes with defined capital needs and longer-term payback horizons.

The 60-70% line of credit volume tells me most business capital needs fall into the first category – ongoing operational working capital – rather than the second category – major capital investments.

Why This Matters for Business Owners

If you’re running a small business and thinking about financing, my data suggests you should start by evaluating whether a line of credit solves your problem before considering traditional loans.

Ask yourself these questions: Can I predict exactly when I’ll need this capital? Can I predict exactly how much I’ll need? Do I know precisely when I’ll have the cash to repay it? Do I need the money all at once or in smaller amounts over time? Am I willing to pay for money I’m not actively using?

If the answers suggest uncertainty, unpredictability, or timing flexibility, you’re probably a line of credit candidate – just like 60-70% of the businesses I work with.

What Lenders Get Wrong About Small Business

Traditional banks still treat lines of credit as supplementary products. They push term loans as primary solutions and offer lines reluctantly, usually with heavy collateral requirements and restrictive covenants.

This approach is completely backwards from what the market actually wants.

Businesses want flexible capital with minimal restrictions that scales with their operational reality. They’ll tolerate some collateral requirements and covenant structures, but they fundamentally need flexibility more than they need theoretical cost optimization.

The lenders succeeding in the market – and the reason we’ve grown so substantially – are those offering properly structured lines of credit at scale. Not as afterthoughts to “real lending” but as primary products designed for how businesses actually operate.

The Future I’m Seeing

The trend toward lines of credit is accelerating, not stabilizing. As I look at our pipeline, lines represent even higher percentage of incoming applications than closed deals.

I attribute this to two factors: businesses increasingly understanding that flexible capital solves more problems than fixed capital, and new entrants to business ownership (younger entrepreneurs, particularly) thinking about finance differently than previous generations.

They don’t assume businesses should operate on fixed budgets with predictable timing. They assume volatility is normal and financing should accommodate rather than ignore it.

I expect within 2-3 years we’ll be seeing 75-80% of our volume in lines of credit and revolving products. The market is telling me clearly: this is what businesses actually need.

What 60-70% Actually Reveals

The dominance of lines of credit in our portfolio isn’t a sales strategy or product preference on our part – it’s a direct reflection of how small businesses really operate when you strip away the business school theories and textbook assumptions.

Businesses don’t run on predictable schedules with stable cash flows and definable capital needs. They operate in constant uncertainty, managing timing gaps between expenses and revenues, capturing opportunities that emerge unexpectedly, and navigating seasonal patterns and growth dynamics.

Financing that works for these businesses must accommodate this reality rather than forcing businesses into structures designed for stability they don’t experience.

60-70% of our volume being lines of credit tells me we’re finally financing businesses the way they actually run, not the way we wish they ran.

BORROW | BUILD | BELIEVE

Asset backed accounts receivable credit facilities up to $20 mil+

UP TO $5 MILLION, NON COLLATERALIZED SUBORDINATED CAPITAL | WITHIN 7 DAYS:

GET FINANCING IN 3 STEPS