Business line of credit: a revolving limit you draw when you need it
A business line of credit is a sanctioned limit a business can draw from, repay and draw again, paying interest only on the amount drawn. Udyam-registered micro enterprises can also get a revolving Micro Credit Card of up to ₹5,00,000, backed by a CGTMSE guarantee. It suits a business whose costs arrive unevenly.
Capnix is not a lender and never lends its own capital. The lender decides approval, limit, rate and terms. We read how your business spends, share your file with lenders on our panel only after you give consent, and run the lender application. Getting your loan through us costs you nothing: no joining fee, no file charge, no cut of your limit.
- Loan
- Business Line of Credit
- Decided by
- The lender
- Cost to you
- ₹0
- Last checked
The facts that matter
| Fact | What it means | Source |
|---|---|---|
| Micro Credit Card | Announced in the Union Budget 2025-26: customised credit cards with a ₹5,00,000 limit for micro enterprises registered on Udyam. | Union Budget speech 2025-26 Checked 02-Oct-2026 |
| Cover for the card | CGTMSE covers Micro Credit Cards with a 75% guarantee and a 0.55% fee, for Udyam-registered micro enterprises, with a JanSamarth reference number. |
CGTMSE circular 259, 18-Mar-2026 Checked 02-Oct-2026 |
| Cooling-off exit | On a digital loan you can exit within a cooling-off period of at least one day by repaying the principal and proportionate annual percentage rate, with no penalty. |
RBI Digital Lending Directions, 08-May-2025 Checked 02-Oct-2026 |
| Penal charges | A penalty is a penal charge, not extra interest, and it cannot be added to the loan to earn more interest. |
RBI penal charges circular, 18-Aug-2023 Checked 02-Oct-2026 |
How a revolving line of credit works
The lender sanctions a limit. You draw what you need, repay, and draw again within the limit. Interest is charged on the amount you have drawn, not on the whole limit.
Lenders usually read cash flow, banking record, GST filing and credit history before they set the limit.
Line of credit, cash credit, overdraft or term loan?
Each product suits a different pattern of spending. The rows below describe usual lender practice, not rules.
| Item | Line of credit | Cash credit or overdraft | Term loan |
|---|---|---|---|
| How you draw | Draw, repay and draw again | Draw, repay and draw again | One lump sum |
| Interest is charged on | The amount drawn | The amount drawn | The loan, as per the schedule |
| Security lenders often ask for | Cash flow and banking record | Stock, receivables or property | Cash flow, sometimes the asset |
| Renewal | Reviewed at the lender's cycle | Reviewed at the lender's cycle | None, the loan ends at its tenor |
| Best for | Costs that arrive unevenly | A repeating stock and receivable cycle | One planned investment |
See also
Government-linked revolving limits
Two government-linked routes give a small business a revolving limit.
| Route | How it works | Source |
|---|---|---|
| Micro Credit Card | A revolving limit of up to ₹5,00,000 for Udyam-registered micro enterprises, with CGTMSE cover of 75%. Live issuance by banks is not yet confirmed, so ask the lender. |
CGTMSE circular 259, 18-Mar-2026 Checked 02-Oct-2026 |
| Mudra Card | A RuPay debit card that gives a Mudra borrower a working capital line as cash credit or overdraft, drawn at an ATM or POS machine and repaid when you have surplus. | Mudra FAQ Checked 02-Oct-2026 |
What lenders check
A revolving limit is read on conduct, not on a single document. Lenders look at how steadily money moves through your account, whether GST returns are filed on time, and how you have repaid before.
Costs to expect
| Charge | What to expect | Source |
|---|---|---|
| Interest | Charged on the amount drawn, not on the whole limit. | |
| Penal charges | A charge, not extra interest, and never compounded. |
RBI penal charges circular, 18-Aug-2023 Checked 02-Oct-2026 |
| Anything else | Any fee left out of the Key Facts Statement needs your explicit agreement before it can be charged. |
RBI Key Facts Statement circular, 15-Apr-2024 Checked 02-Oct-2026 |
| Digital credit line | A cooling-off exit of at least one day, with no penalty, on principal plus proportionate annual percentage rate. |
RBI Digital Lending Directions, 08-May-2025 Checked 02-Oct-2026 |
Worked example: ₹6,00,000 drawn for 30 days
A business has a limit of ₹10,00,000 and draws ₹6,00,000 for 30 days. The example rate is 10.5% a year, the top of the range one public sector bank publishes for micro enterprise loans up to ₹25,00,000. It is an example, not an offer.
| Item | On the amount drawn | On the full limit |
|---|---|---|
| Amount interest is charged on | ₹6,00,000 | ₹10,00,000 |
| Interest for 30 days at 10.5% a year | ₹5,178 | ₹8,630 |
Interest = amount x rate x days / 365. Lenders may charge on the daily balance, so the exact figure depends on when you draw and repay.
Source: Bank of Baroda MSME loan rates, checked 02-Oct-2026.
Who it suits and who it does not
A strong fit if
- Your funding needs change from month to month
- You want a safety net rather than one lump sum
- You value flexibility and your banking record is regular
Not a fit if
- You need one fixed amount for one purchase (see a term loan)
- Your account shows frequent bounced payments or long gaps in activity
Documents lenders usually ask for
One bank's own guide lists the records below.
- Your bank statements for the past 6 to 12 months
- Six to twelve months of GST returns
- One to three years of income tax returns
- Business proof, such as a GST certificate or Udyam certificate
- KYC papers for the business and its promoters
Source: Bank of Baroda guide to business loan documents, 29-Apr-2026, checked 02-Oct-2026.
Business loan documents checklistHow Capnix fits
- Start with your free Capnix score. It shows what a revolving limit lender reads: banking health, GST discipline and credit history.
- Capnix shares your file only with lenders on our panel, and only after you give consent, and you can withdraw that consent in your Capnix account.
- The lender pays Capnix a fee after disbursal. It is never added to your limit or your rate.
More than a loan. A team that gets you there
A limit that flexes with you
We help you pursue a credit line whose limit and draw terms fit how unevenly your costs arrive, so funds are there when you need them.
Approach the right lenders once
We present your profile to lenders who offer revolving credit, so you do not search lender by lender.
Where this helps
- Draw funds only when you need them
- Cover unexpected costs without applying again
- Manage irregular or seasonal cash flow
- Pay interest only on the amount you use
What happens after you start
We work out your Capnix score first, then work the lender applications with you until the money is disbursed.
See how it worksLoan products, rates, and eligibility are determined by the lenders on our panel. Capnix is not a lender and does not lend its own capital. We run your loan journey end to end.
Have a question?
Find answers here
Whether you are scaling up, smoothing cash flow, or buying new equipment, we take your file to the right lender and stay with it through to disbursal.
Read how you spend. Matched to the right lender
A credit line is only useful if its limit and draw terms fit how unpredictably your costs arrive. We read your spending pattern, then shape the case around the flexibility you actually need.
From there we approach lenders who offer revolving credit on sensible terms, so funds are there the moment you need them, and getting your loan costs you nothing.
Real people,
start to disbursal.
No hand-offs and no generic replies. A dedicated team
works the lenders while you keep running your business.