Let's Get Started
A business line of credit is a type of small-business loan that gives access to a pool of funds to draw from when you need capital. It gives you the flexibility to borrow up to a set amount—typically anywhere from $1,000 to $500,000 or more—whenever you need access to capital. You don’t make payments or incur interest until you actually tap into those funds.
A business line of credit can help you handle cash flow gaps, access more working capital, address an emergency, or take advantage of a business opportunity.
Ready to shop and apply? If you’re already familiar with the basics of a business line of credit, then you can jump right to comparing the best business line of credit lenders.
Business Line of Credit Details
| Max. Line Amount | Repayment Term | Interest Rates | Speed |
|---|---|---|---|
| $500,000+ | 3 months to 5+ years | 10% - 99% | Under 24 hours (in some cases) |
How Does a Business Line of Credit Work?
Business lines of credit are similar to a credit card: A lender approves you for a set amount of financing (similar to a credit limit) which you can draw from at your discretion.
Once you repay what you’ve spent, you can continue to draw capital from your line of credit. This type of financing is considered revolving credit because you can tap into it again and again.
Types of Business Lines of Credit
A business line of credit can be secured or unsecured.
- Secured business line of credit. A secured line of credit is backed by physical collateral, such as inventory or equipment. If you can’t repay your credit line, your lender can seize your assets to recover their losses.
- Unsecured business line of credit. An unsecured credit line doesn’t require physical collateral. Some lenders, however, will still require a personal guarantee or a UCC lien on your business assets.
Because secured business lines of credit help mitigate risk for the lender, they tend to have more competitive rates and terms than unsecured options. Unsecured lines of credit, however, can still be a good option for those who need fast access to capital—as well as for new companies that don’t have enough collateral to offer.
Best Business Lines of Credit
Business lines of credit are available from banks, SBA lenders, and online lenders. If you’re ready to start shopping and comparing your options, you might start with our list below.
| Business line of credit lender | Backd | Headway Capital | OnDeck | Fundbox | Bank of America |
|---|---|---|---|---|---|
Best for |
Large credit line amounts |
New businesses; low-revenue businesses |
Fast funding |
New businesses; borrowers with bad credit |
Established businesses; low interest rates |
Funding Amount |
$10,000 to $750,000 |
$5,000 to $100,000 |
$6,000 to $100,000 |
$1,000 to $150,000 |
Starting at $10,000 |
Interest Rate |
Undisclosed |
35% to 80% |
35.90% to 84.90% |
36% to 99% |
Starting at 9.5% |
Repayment Terms |
6 or 12 months |
12, 18, or 24 months |
12, 18, or 24 months |
12 or 24 weeks |
Revolving with annual renewal |
Funding Speed |
As fast as 48 hours |
As fast as the next business day |
As fast as the same day |
As fast as the next business day |
Not specified |
Min. Credit Score |
600 |
625 |
625 |
600 |
700 |
Min. Time in Business |
1 year |
6 months |
1 year |
3 months |
2 years |
Min. Annual Revenue |
$300,000 |
$50,000 |
$100,000 |
$100,000 |
$100,000 |
Pros and Cons of a Business Line of Credit
A business line of credit can be a good option for working capital needs, but may not be right for every business or situation. Here are some benefits and drawbacks to consider:
Pros
- Only pay interest on the funds you draw
- Flexible funding; can be used for a variety of short-term needs
- Can be accessible to startups and borrowers with bad credit
Cons
- May have to pay additional fees (draw fees, account maintenance fees, etc.) that increase the total cost
- Not suitable for large purchases or investments
- Can have shorter repayment terms than more traditional loans
Ideal Qualifications for a Business Line of Credit
How to Qualify and Apply for a Business Line of Credit
If you think a business line of credit is the right option for you, follow these steps to see if you qualify and start your application.
Determine what type of funding you need
Think about how much capital you need and how you plan to use it. You should also consider whether you’d prefer a secured or unsecured line of credit. If you’re looking for a secured line of credit, you’ll want to make sure you have a valuation of the collateral you plan to use.
Evaluate your qualifications
Most lenders will evaluate your business using your personal credit score, time in operation, and annual revenue. The specific business line of credit requirements you’ll need to meet, however, will vary based on the lender.
In general, it’s helpful to be able to meet the following minimum qualifications:
- Personal credit score: 600+
- Time in business: Six months to one year
- Annual revenue: $50,000 to $100,000+
Compare lenders
Research and compare multiple options to find the best fit for you. You’ll want to look for a lender whose requirements you can meet and one who offers the type of credit line you need.
Keep in mind that banks and SBA lenders will offer the most competitive rates and terms, but have strict qualifications. Online lenders, on the other hand, have more flexible qualifications but higher interest rates.
Complete and submit your application
If you’re working with an online lender, you’ll usually be able to complete the application process quickly. These companies typically ask for basic information about your business and a few supporting documents. Traditional lenders, on the other hand, may have a more detailed process. Plus, some banks may require you to apply in person.
In general, you’ll need:
- Copy of personal identification
- Business employer identification number
- Personal and business bank statements
- Personal and business tax returns
- Financial statements, such as a profit and loss statement and balance sheet
Online lenders may be able to approve and fund your application as quickly as the same day. Traditional lenders may take anywhere from several days to several weeks to issue funding.