A line of credit lets you borrow and pay interest on a flexible sum of money.
A business line of credit is a type of small-business loan that provides flexibility that a regular business loan doesn’t. A line of credit works like a credit card. With a business line of credit, you can borrow up to a certain limit — say, $100,000 — and pay interest only on the portion of money that you borrow. You then draw and repay funds as you wish, as long as you don’t exceed your credit limit.
When you need to manage cash flow, buy inventory or pay for an unexpected expense, then a business line of credit makes sense.
How Much Do You Need?
Our pick for
Business lines of credit up to $100,000
OnDeck offers quick funding for qualified borrowers on lines of credit up to $100,000.
OnDeck - Line of credit
Est. APR
11.00-61.90%
Min. Credit Score
600
OnDeck offers a fast line of credit for small-business owners with less-than-stellar credit who need to manage cash flow or buy inventory.
Pros
- Cash can be available within the same business day.
- Requires low minimum credit score.
- Less paperwork than most lenders.
Cons
- Fixed-fee structure means early repayment will not save interest.
- Requires weekly repayments.
- Requires personal guarantee.
Qualifications:
- Minimum credit score: 600.
- Minimum time in business: 1 year.
- Minimum annual revenue: $100,000.
- No bankruptcies in the past 2 years.
May fund quickly
Our pick for
Business lines of credit up to $150,000
Fundbox offers business lines of credit up to $150,000 for short-term financing needs.
Fundbox - Line of credit
Est. APR
10.10-79.80%
Min. Credit Score
600
Fundbox offers a business line of credit to fill a cash-flow gap, and qualifying is easier than with other lenders.
Pros
- Cash can be available by the next day.
- Low minimum credit score requirement.
Cons
- Rates are high compared to traditional banks.
Qualifications:
- Minimum credit score: 600.
- Minimum time in business: 6 months.
- Minimum annual revenue: $100,000.
May fund quickly
Our pick for
Business lines of credit up to $250,000
BlueVine offers fast funding for borrowers, with max borrowing amounts of $250,000.
BlueVine - Line of credit
Est. APR
15.00-78.00%
Min. Credit Score
600
BlueVine's line of credit provides fast working capital for short-term borrowing needs.
Pros
- Cash can be available within 12 to 24 hours.
- Multiple term lengths for different financing needs.
Cons
- May require weekly repayments.
- Requires personal guarantee.
- Not available in North Dakota, South Dakota or Vermont.
Qualifications:
- Minimum credit score: 600.
- Minimum time in business: 6 months.
- Minimum annual revenue: $120,000.
May fund quickly
How Much Do You Need?
Summary of What Is a Business Line of Credit? How to Get the Best Options in 2022
| Lender | Best For | Est. APR | Min. Credit Score | Next Steps |
|---|---|---|---|---|
OnDeck - Line of credit See Your Options
with Fundera by Nerdwallet | Best for Business lines of credit up to $100,000 | 11.00-61.90% | 600 | See Your Options
with Fundera by Nerdwallet |
Fundbox - Line of credit See Your Options
with Fundera by Nerdwallet | Best for Business lines of credit up to $150,000 | 10.10-79.80% | 600 | See Your Options
with Fundera by Nerdwallet |
BlueVine - Line of credit See Your Options
with Fundera by Nerdwallet | Best for Business lines of credit up to $250,000 | 15.00-78.00% | 600 | See Your Options
with Fundera by Nerdwallet |
How does a business line of credit work?
A business line of credit differs from a term loan, which provides a one-time lump sum of cash upfront, repaid over a fixed period, or term. Line of credit borrowing limits — ranging from $1,000 to $250,000 — are usually smaller than term loans.
A line of credit works similarly to a credit card. With a line of credit, you can draw funds as needed and repay them over time. You can keep reusing and repaying your line of credit as often as you’d like, as long as you make payments on time and don’t exceed your credit limit.
You pay interest only on the portion of money that you borrow, and many lenders allow you to repay your full balance early to save on interest costs.
How to get a business line of credit
At a minimum, you’ll often need at least six months in business and $25,000 in annual revenue to qualify for a business line of credit. Although not all lenders set a minimum credit score, borrowers most likely will need a score of 500 or higher to qualify.
Business lines of credit are issued by traditional lenders, like banks, as well as online lenders like OnDeck and BlueVine. Interest rates and borrowing limits can vary widely depending on the lender’s requirements and the borrower’s circumstances.
When you apply for a business line of credit, lenders typically require documentation that can include personal and business tax returns, bank account information and business financial statements, such as profit-and-loss statements and a balance sheet.
Many traditional lenders require businesses to have strong revenue and several years of history to qualify for a line of credit. Larger lines of credit may require collateral, which can be seized by the lender if you fail to make payments. SBA lines of credit have similarly strict requirements.
Online lenders often have looser qualification requirements than banks. However, these lenders are also likely to charge higher rates than banks and may have lower credit limits.
After approval, lenders may be able to issue business lines of credit in a matter of days. Banks generally take longer than online lenders to set up new lines of credit.
Secured vs. unsecured business line of credit: What's the difference?
A secured business line of credit means you are putting up assets such as inventory or property as collateral. If you fail to pay back the credit line, a lender could seize your assets.
Obtaining an unsecured business credit line doesn’t require collateral, but some lenders may still require a personal guarantee or a lien on a business’ assets.
A personal guarantee gives a lender the right to go after your personal assets, such as a house, if you default on a loan. A lien is similar; a lender can seize your business assets if you haven’t repaid a loan.
When comparing lenders, ask whether they require a collateral, personal guarantee or a lien so that you can find the option that’s best for your business.
Business credit cards vs. business credit lines
Business credit cards are also lines of credit, but differ from a traditional business line of credit in several ways.
A business line of credit can provide a higher credit limit, may be secured by collateral and provides actual cash to your bank account when you make a draw. You can get cash through a business credit card, but you’ll be charged fees and a higher APR to do so. Other common fees for business credit cards include annual fees and late-payment fees.
Business credit cards work best for smaller ongoing expenses and for newer businesses without established finances, while a business line of credit works best for larger ongoing expenses and more mature businesses.
Just like personal credit cards, business credit cards can provide rewards or cash back for spending. Rewards are typically related to business expenses, such as office supplies, gas, internet and cable. They may also offer 0% interest promotions, which allow you to pay no interest on your balance for a specific time period after signing up for the card.
Last updated on November 7, 2021
To recap our selections...
What Is a Business Line of Credit? How to Get the Best Options in 2022
- OnDeck - Line of credit: Best for Business lines of credit up to $100,000
- Fundbox - Line of credit: Best for Business lines of credit up to $150,000
- BlueVine - Line of credit: Best for Business lines of credit up to $250,000
Frequently Asked Questions
A business line of credit works best when you need to finance short-term expenses, such as replenishing inventory or covering unexpected costs. A small-business term loan finances large one-time expenses, like equipment purchase.
A business credit card can provide many of the same benefits as a business line of credit, such as access to repeat financing and the ability to build business credit. If you struggle with thin or poor credit, a business card for bad credit can give you a jump start.
Online lenders, banks and credit unions offer business lines of credit. Banks and credit unions typically require strong business revenue and at least a few years of history to qualify. Online lenders have looser qualifications, but may charge higher rates. Compare your options to find the one that best fits your financing needs.
For newer businesses, it can be difficult to get a small-business line of credit. Traditional lenders, such as banks, typically require businesses to have several years of operations, revenue and strong finances to secure any type of financing.