What is a line of credit — and why it's not just another loan?

If you've ever had to front materials for a job before the client pays, you already understand the problem a line of credit solves.

You've done the quote. You've won the job. But the materials need to go on the truck on Monday, and the invoice isn't due for 45 days. So you either use your own cash, delay the start, or put it on a credit card and cringe at the interest rate.

A line of credit might be a better option for your business. Here's how it works.

In a nutshell:

A line of credit isn't a loan. It's a pre-approved amount of money you can draw from when you need it, repay, and use again. You only pay interest on what you actually use, not the whole amount. For trade businesses managing the gap between buying materials, hiring staff and getting paid, it can be a much better tool than a standard loan or a credit card.

A loan gives you money once. A line of credit stays available.

When you take out a business loan, you get a lump sum. You repay it over a fixed period with fixed repayments. Whether you need all of it or not, you're paying interest on the whole amount from day one.

A line of credit works differently.

Think of it like a tap. You get approved for a set limit — say, $20,000. That money sits there available to you. You draw what you need, when you need it. You repay it when cash comes in. And then it's available again.

You only ever pay interest on what's actually drawn down. If you've got $20,000 available but only use $5,000 this month, you pay interest on $5,000.

For trade businesses with lumpy, unpredictable cash flow, that flexibility is worth a lot.

How is it different from a credit card?

Credit cards are a form of revolving credit — so in that sense they're similar to a line of credit. But there are a few important differences for business use.

Interest rates. Business credit cards typically charge higher interest rates than a business line of credit. If you're carrying a balance for more than a few weeks, it adds up fast.

What you can buy. A credit card is designed for everyday purchases. A line of credit is designed for business - including buying materials, managing payroll, or bridging a cash flow gap between a large job and the invoice being paid.

Repayment structure. Credit cards have minimum monthly repayments that don't always align with how your business gets paid. A line of credit can give you more flexibility to repay when the money actually lands.

Separation from personal spending. Using a business line of credit keeps your business and personal finances clean — important at tax time.

The trade business problem it solves

Here's the reality for most plumbers and HVAC businesses: money flows in lumps.

You finish a job, invoice, and wait. 30 days. 45 days. Sometimes longer if a client drags their feet. Meanwhile, the next job needs materials, your crew needs paying, and the super is due.

That gap — between buying materials or paying costs and getting paid for the work — is the cash flow gap. And it's not a sign that your business is struggling. It's just how trade businesses work.

A line of credit sits in that gap. You use it when you need to, and repay it when the invoice lands. Then it resets, ready for the next job.

How the Laddr line of credit works

Laddr is a line of credit built specifically for Reece trade customers.  

Here's how it works in practice:

1. Apply in minutes via Reece maX

Complete a simple online application form through your maX account in just a few minutes – no paperwork, no hassle.  

2. Get a quick decision on a credit limit that fits your business — from $3,000 to $250,000.

We’ll review your details fast and let you know your outcome straight away.  

3. Access your funds

Once approved, you have a facility that you can draw down and pay back any time. Pay interest only on the funds you use and for the days that you have them.  

When a line of credit makes sense

A line of credit isn't the right tool for every situation. Here's when it makes sense, and when it doesn't.

Good fit:

• Buying materials for a job before the invoice is due

• Bridging the gap between a large job and getting paid

• Smoothing out lumpy cash flow without dipping into savings

• Covering payroll or super in a slow payment period

• Taking advantage of EOFY buying before 30 June when cash is tied up

Not the right fit:

• Funding long-term assets you'll pay off over 5+ years (a business loan is better for that)

• Ongoing operating costs that your business can't actually cover (a line of credit isn't a substitute for revenue)

• Spending on things that don't generate income

The key is using it as a timing tool, not a dependency. It bridges the gap between when you spend and when you get paid, not as a way to spend money you haven't earned.

The bottom line

A loan is a one-time injection. A credit card can be expensive and built for the wrong things. A line of credit is flexible, sits ready when you need it, and costs you nothing when you don't.

For trade businesses that buy materials upfront and wait on invoices, it's one of the most practical financial tools available.

See how the Laddr line of credit works →

General information only — not financial advice. Talk to your accountant or financial adviser about what's right for your business.