A line of credit lets you draw funds when income slows and repay when revenue picks up again.
Kewdale sits close to Perth Airport and the freight precinct, which means many businesses here move stock, provide logistics support, or service industries with their own seasonal patterns. When your invoices don't align with your wage run or stock order deadlines, you need access to funding that flexes with your cycle rather than locking you into fixed repayments you can't meet in off-peak months.
How a Line of Credit Works Compared to a Term Loan
A line of credit charges interest only on the amount you actually draw, and you can repay and redraw as often as needed within the approved limit.
Consider a freight business in Kewdale that invoices major clients on 60-day terms but pays drivers and fuel costs weekly. In January and February, when warehouse volumes drop and payments slow, the business draws $40,000 from a pre-approved $75,000 line of credit to cover wages and supplier invoices. By April, when clients settle outstanding invoices, the business repays the full $40,000 and the credit line resets. Interest applies only to the $40,000 for the weeks it was drawn, not the full $75,000 limit.
A term loan, by contrast, delivers a lump sum upfront and requires fixed repayments regardless of whether revenue has arrived. If you borrow $40,000 on a term loan in January, you're committed to monthly repayments through the year even when cash is tight. That structure suits one-off purchases but creates pressure during the exact months you're trying to manage a gap.
When Invoice Financing Suits Better Than a Line of Credit
Invoice financing advances a percentage of your outstanding invoices immediately, then settles the balance when your client pays.
If your cashflow gap is caused entirely by slow-paying clients and you have strong invoices from creditworthy businesses, invoice financing can release 80% to 90% of the invoice value within 24 hours. You don't draw against a limit or repay from other income streams. The advance is tied directly to the invoice, and the cost is a percentage of the invoice value rather than ongoing interest on a revolving facility.
A line of credit works better when your revenue is genuinely seasonal rather than delayed, or when you need to fund expenses that aren't tied to a specific invoice. If you're ordering stock ahead of a busy period or covering fixed overheads during a slow month, a line of credit gives you control over timing and repayment without needing an invoice to unlock the funds. Our Asset Finance clients in transport and logistics often combine both structures depending on whether they're bridging an invoice gap or funding a stock order ahead of demand.
Unsecured Lines vs Asset-Backed Facilities
An unsecured business line of credit approves based on trading history and turnover, while an asset-backed facility uses equipment, stock, or receivables as security.
Unsecured facilities typically approve faster because there's no valuation or registration process, but limits are lower and rates reflect the higher risk to the lender. If your business turns over $500,000 or more annually with consistent bank statements, you might access $30,000 to $75,000 unsecured within a few days. That suits short-term gaps where you need the funds this week and don't want to tie up business assets.
Asset-backed lines can reach higher limits because the lender holds security over stock, equipment, or receivables. If you're running a workshop in the Kewdale industrial area with $200,000 worth of machinery or holding $150,000 in inventory, a secured facility might approve $100,000 or more at a lower rate than unsecured. The tradeoff is time: valuations, registrations, and security documents add a week or more to the process. If your seasonal gap is predictable, setting up the facility before you need it means you can draw when the gap arrives without waiting on approvals.
Structuring Repayment Around Your Trading Cycle
Repayment terms should match the timing of your revenue, not a calendar month.
In our experience, businesses with predictable seasonal peaks set a repayment schedule that aligns with when cash actually arrives. A landscaping supplier servicing Kewdale's commercial developments might draw in winter when sales slow, then repay in spring and summer when projects restart and invoices settle. Some lenders allow interest-only periods during off-peak months, with principal and interest due when revenue lifts. Others prefer a flexible arrangement where you repay any amount at any time without penalty, as long as the limit isn't exceeded.
Most problems occur when a business treats a line of credit like a term loan and only makes minimum payments, or when they draw the full limit permanently without repaying. The facility works when you use it as a bridge, not a permanent source of working capital. If you're drawing the same amount every month for six months without repaying, that's a sign the business needs a different structure or that expenses exceed sustainable revenue.
What Lenders Assess Before Approving a Line of Credit
Lenders want to see consistent revenue, a clear reason for the seasonal gap, and evidence that you can repay when income returns.
They'll review six to twelve months of bank statements to confirm turnover and identify your trading pattern. If your statements show regular deposits that drop predictably for two or three months each year, then recover, that supports the case for seasonal funding. If deposits are erratic or declining overall, the lender will question whether the gap is seasonal or structural.
You'll also need to explain what the funds will cover and how repayment will occur. A explanation like "covering wages and stock orders in January and February, repaying from March invoices" is clearer than "general working capital." Lenders approve faster when the purpose and repayment source are specific. For Kewdale businesses near the airport and freight hubs, showing that your cycle matches broader industry patterns, such as post-Christmas slowdowns or mid-year construction pauses, adds credibility.
Comparing Costs Across Cashflow Funding Options
Interest rates on lines of credit range from around 8% to 15% depending on security and risk, while invoice financing typically charges 1% to 3% per month on the advanced amount.
An unsecured line of credit at 12% costs $1,000 per month on a $100,000 draw, but only while that amount is outstanding. If you repay within six weeks, you're charged for six weeks, not the full year. Invoice financing at 2% per month on a $50,000 invoice costs $1,000 if the client pays in 30 days, but $2,000 if they take 60 days. The cost compounds with payment delays, which is why invoice financing works well for short-term gaps but becomes expensive if clients consistently pay late.
Merchant cash advances and fintech products that repay from daily sales percentages can charge effective rates of 20% to 40% annually once fees are included. They approve quickly and don't require financials, but the cost makes them suitable only for very short-term needs where other options aren't available. If you're comparing offers, convert all fees and charges to an annualised rate so you can see the true cost across different structures.
Call one of our team or book an appointment at a time that works for you. We'll review your trading cycle, compare your options across lenders, and help you set up a facility that bridges your seasonal gaps without overcommitting during quieter months.
