An ELOC gives the company a draw-down right rather than a lump sum. Each draw sells shares to the facility provider at a formula price, typically a few percent below a recent average. The provider is a financing counterparty, not a believer in the story, and usually hedges or sells the shares straight away.
Functionally it is an at-the-market-offering with one guaranteed buyer and a wider spread. Caps limit each draw to a share of recent trading volume, so a rising price and rising volume unlock larger draws.
Example: a $100M ELOC priced at a 3% discount to the 3-day average. With the stock at $5, a $10M draw issues about 2.06M shares at $4.85. Ten such draws over a year add roughly 20M shares.
Related: at-the-market-offering, dilution, private-placement, shelf-registration, penny-stock