Best Business Lines of Credit
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Running a small business is no easy task. And paying all those bills? That can be expensive, too. Small businesses need to regularly repair or replace their equipment, pay for costly insurance and update their product lines. Then there is the cost of employees and marketing. It’s not surprising given all these expenses that both established businesses and startups can struggle with cash flow.
That’s where a business line of credit can help. These lines of credit operate much like a credit card for businesses. Traditional banks, online lenders and other lenders approve you for a line of credit up to a certain amount. This credit limit can vary depending on your personal credit score or your business credit score, a measure of your business’ financial health.
And much like a credit card, you only pay back what you borrow, with interest. The repayment terms of this revolving line of credit will vary, and how much you pay overall for your business line of credit will depend on the interest rates your lender charges. Your lender will charge higher interest rates if you have bad credit or it deems your creditworthiness to be low.
Say your business bank studies your credit history and FICO score and determines that your small business qualifies for a line of credit of $80,000. You can then borrow up to that amount whenever you’d like to help cover your business’ expenses. But you only pay back what you borrow. Say you borrow a total of $60,000 over the life of your business line of credit to help cover gaps in your cash flow. You only pay back that $60,000 with interest, no matter how high your credit limit is.
Consider a business line of credit to be an alternative to a short-term loan. Instead of qualifying for a specific loan amount that you pay back with regular monthly payments, business lines of credit come with more flexibility: If you have an expensive month, you can borrow more. If your business needs to spend less in the next month, you borrow, and repay, less. Unlike with a business loan product, you won’t receive a lump sum of money with a business line of credit. You’ll only borrow what you need.
Finding a business lender that offers business lines of credit isn’t challenging. Plenty do. But how do you find the right lender with which to work, and how does the application process work? What minimum credit score or eligibility requirements will you need to meet to qualify? How do you qualify for higher credit limits?
Read on for our look at six of the top providers of business lines of credit.
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Overview of the best providers of business lines of credit
Provider | What it’s best for |
American Express | Best if you want to work with an established brand |
Bluevine | Best for short-term funding |
Wells Fargo | Best for established businesses |
Bank of America | Best if you want a secured line of credit |
OnDeck | Best for borrowing lower amounts |
Fundbox | Best if you need access to credit quickly |
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American Express
American Express offers both an unsecured business line of credit, in which you aren't required to put up any collateral, and a secured business line of credit, in which you do have to provide collateral as a form of a protection for the lender. Lines of credit from American Express range from $2,000 to $250,000. Initial lines of credit above $150,000, though, are only available to borrowers who have a pre-existing American Express relationship.
You will have to meet certain revenue requirements and have a high enough credit rating to qualify for an American Express business line of credit. American Express says that you'll need a FICO score of at least 660 and that your business must have a recent average monthly revenue of at least $3,000. You must have started your business at least a year ago and you must be at least 18.
American Express also requires that you link a business bank account to your application when applying for a business line of credit. If you have American Express business credit cards, you might be pre-approved for a business line of credit from the company.
On its website, American Express says that you can apply for a business line of credit online in just minutes. You can choose terms of six, 12, 18 or 24 months.
American Express does not charge origination fees or prepayment penalties for its business lines of credit. It does charge monthly fees for any month in which you have an outstanding balance, fees that vary depending on your loan term. These fees range from 3% to 9% for six-month loans, 6% to 18% for 12-month loans, 9% to 27% for 18-month loans and 12% to 18% for 24-month loans. American Express does not charge an annual fee for its business lines of credit.
Bluevine
If you want a business line of credit quickly? Consider Bluevine. You can apply for a business line of credit to boost your cash flow and increase your working capital entirely online. Bluevine says that applying for a line of credit will have no impact on your credit score. Depending on your qualifying requirements, such as your credit score and your business' annual revenue, you might qualify for a line of credit from Bluevine with an interest rate as low as 7.8%.
You can apply for a line of credit from $5,000 and up to $250,000 with Bluevine. Repayment terms are either six or 12 months. Your business will need to make $10,000 in monthly revenue and you'll need a personal FICO credit score of at least 625 to qualify. Your business must also be more than 12 months old and you must have filed for no bankruptcies in the past year. Bluevine also requires that you have an active bank connection and says that it's easier to apply if you already have a Bluevine business checking account.
Bluevine charges no setup fees, subscription fees, maintenance fees or termination fees. You might be charged a draw fee every time you draw from your line of credit. This will be a percentage of the money you draw and will vary based on your creditworthiness. Bluevine does not say on its website what its draw fees are.
Wells Fargo
If you want to boost your business' financing options and you want to work with a big name? You might consider a business line of credit from national lender Wells Fargo.
Wells Fargo offers unsecured business lines of credit, meaning that you won't have to back your loan with any collateral. In a secured line of credit, you do have to provide collateral, perhaps a certificate of deposit for a certain amount. If you default on your payments with a secured line, your lender can take the collateral that you pledge. With an unsecured line of credit, you don't have to put any of your assets at risk.
The Wells Fargo Business line of credit is available for customers in business for two or more years. You can apply for a credit line of $10,000 to $150,000 at interest rates as low as prime + 1.75%. You won't be charged an annual fee for the first year. Wells Fargo charges an annual fee of $95 after the first year for this line of credit if your credit limit is $10,000 to $25,000 or $175 if your credit limit is higher than $25,000.
You can also apply for the Wells Fargo Small Business Advantage line of credit if you have been in business for less than two years. This line of credit charges no annual fee. You can apply for credit limits of $5,000 to $50,000 at interest rates as low as prime + 4.50%.
Wells Fargo says that most successful applicants have a FICO credit score of at least 680. A BusinessLine line of credit account requires a personal guarantee from any owner with 25% or more ownership in the business. A Small Business Advantage line of credit requires personal guarantees from any owner with 20% or more ownership in the business.
Wells Fargo also offers its Prime Line of Credit for businesses with $2 million to $10 million in annual sales. This line of credit charges an origination fee of 0.50% and comes with a credit limit of $100,000 to $1 million at interest rates as low as prime + 0.50%. This is a secured business line of credit secured by your business assets.
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Bank of America
Bank of America also offers both secured and unsecured business lines of credit. You'll need a solid credit score, though, to qualify for one of these products.
For a Bank of America unsecured business line of credit, you'll need a personal credit score of 700 or higher. Your business must be at least two years old and it must generate at least $100,000 in revenue.
You must borrow at least $10,000 with one of these lines of credit, though Bank of America does not list an upper limit on how much business owners can borrow. Line terms range from one to five years. The interest rate on an unsecured business line of credit can be as low as 10.75% depending on your creditworthiness.
Bank of America says it does not charge any cash advance fees and no interest charges until you use your funds. Your monthly payments will be based on the balance of your line of credit.
If you don't think you can qualify for an unsecured line of credit from Bank of America, you can also apply for a Business Advantage Credit Line Cash Secured line of credit. This line of credit is secured by the collateral that you provide.
You must borrow at least $25,000 with one of Bank of America's secured lines of credit. Your interest rate will vary but can be as low as 9.50%. Your business must be at least two years old under existing ownership and must earn a minimum of $250,000 in annual revenue.
You will have to pay upfront and renewal fees for a secured line of credit. For lines of credit up to $100,000, these fees are $150. The fees rise to $250 for amounts above $100,000 and up to and including $250,000 and 0.5% of the line of credit amount for amounts above $250,000.
OnDeck
If you need a smaller line of credit? OnDeck might be a good choice. You can apply for a line of credit ranging from $6,000 to $100,000. OnDeck is flexible, too, when it comes to loan terms: You can apply for a business line of credit with terms of 12, 18 or 24 months. And when it's time to repay, you can choose either weekly or monthly payments.
You'll apply for an OnDeck line of credit online. OnDeck says it should take just minutes to fill out an application for a business line of credit. You can then work with a loan advisor online to choose the best option for you. OnDeck says that once you sign your contract, you'll gain access to your line of credit as soon as that same day.
You will have to meet certain requirements to qualify for a line of credit from OnDeck. Your business must be at least one year old and generate at least $100,000 in annual revenue. You'll need a personal FICO score of at least 625 and you must have a business checking account.
The total cost of your line of credit will vary depending on your personal and business credit scores, time in business and annual revenue and cash flow. The cost of an OnDeck line of credit can be high. On its website, OnDeck says the average APR, a measure of the cost of a loan that includes both its interest rate and fees, for lines of credit is 55.9%.
In good news for business owners worried about their credit score, OnDeck says that applying for a line of credit entails a soft credit pull that will not hurt your credit. You can also build your business credit history with a line of credit from OnDeck. The lender reports your payments to business credit bureaus, which can boost your business credit score.
Fundbox
Fundbox is a business technology company that has been helping businesses get access to growth capital since 2013. You can apply for a business line of credit from Fundbox for up to $150,000.
Applying for a line of credit from Fundbox is easy, with the company saying it requires just two steps: First, you'll complete the company's online loan application. Then you'll connect your business banking account to complete your application. Fundbox says that you'll typically receive a decision on your application within minutes.
To qualify for a Fundbox line of credit, your business must be based in the United States and generate at least $100,000 in annual revenue. Your business must be at least six months old, and your personal FICO score must be at least 600. You'll also need a business checking account. After approval, you can typically access your funds as soon as the following business day.
Fees will vary, but rates start at 4.66% of the amount that you draw for lines of credit with 12-week terms and 8.99% for lines with 24-week terms.
You can also apply for a Fundbox Plus business line of credit. With this enhanced version of Fundbox's line of credit, you can choose a longer repayment term of 52 weeks. You can also choose between weekly or monthly payments, and you won't have to start making payments on your draws until 28 days. You'll also receive a 20% discount on your line of credit weekly fees, though you will have to pay a $99 monthly fee for this line of credit.
Summary of the bets business lines of credit
Company | Line of credit term lengths | How much can you borrow? | Minimum required personal credit score |
American Express | Six, 12, 18 or 24 months | $2,000 to $250,000 | 660 |
Bluevine | Six or 12 months | Up to $250,000 | 625 |
Wells Fargo | Up to five years | $10,000 to $150,000 | 680 |
Bank of America | One to five years. | At least $10,000. No stated upper limit. | At least 700 for an unsecured line of credit. |
OnDeck | 12, 18 or 24 months | $6,000 to $100,000 | 625 |
Fundbox | 12 to 24 weeks | Up to $150,000 | 600 |
Many Lenders Fund In 24-48 Hours. Start Your Request Today!
Get your small business funded fast! Go to the LendingTree® official site to compare 2024’s top online lenders and get offers.
Secure and Fast.
Pros & Cons
Pros
- Flexibility. You only pay back what you borrow.
- Lower interest rates. Business lines of credit typically come with lower interest rates than you’d get with credit cards and personal loans.
- Better rates if your credit is strong. Providers will check your credit score. If you have a high one, you’ll typically qualify for a lower interest rate.
- Can boost your cash flow. A line of credit can help cover your business expenses when cash is low. You can use your line of credit for most anything, including paying for the salaries of employees and freelancers, expanding your business’ real estate locations, paying for equipment, maintenance and marketing.
Cons
- Fees. Many providers charge annual, monthly or origination fees.
- Not everyone is approved. Lenders will check your personal credit score and your business’ annual revenues. If they are too low, you’ll struggle to qualify for a business line of credit.
- Repayment can be a financial shock. During your line of credit’s draw period, you’re only required to pay interest on what you borrow. When it’s time to repay both the principal balance of what you borrowed along with any additional interest? It can be a financial shock.
FAQs
What are the two phases of a business line of credit?
Business lines of credit come with two phases, the draw period and the repayment period. During the draw period, you can borrow cash. Depending on your lender, this period usually lasts from one to five years. During this period, you are only required to pay interest on what you borrowed. After the draw period, you enter the repayment period, in which you must pay back both the principal balance that you borrowed and any additional interest.
Are business lines of credit free?
Not usually. In addition to interest, many providers charge monthly fees to keep your business line of credit open. Others provide upfront and renewal fees. These fees vary by lender.
What will providers consider before approving me for a business line of credit?
Providers will look at your personal credit score, your business’ annual revenue, the industry in which you work and your business’ age.
How much can I borrow with a business line of credit?
That will depend on your lender and factors such as your credit score and business’ annual revenues. Some lenders will give you a business line of credit of up to $250,000. Others that specialize in smaller businesses provide lines of credit up to $100,000.
Why a business line of credit can be right for you
Not all small business owners will need a business line of credit. But if you sometimes struggle with cash flow? A business line of credit can provide you with the financial flexibility you need to cover payroll, handle unexpected repairs, purchase more inventory, buy equipment or cover maintenance needs. With a line of credit, you only pay back what you eventually borrow. If you only borrow $50,000, that’s what you’ll pay back, with interest, even if your line of credit is for $80,000. Just make sure that you can afford to repay what you’ve borrowed once your line of credit’s draw period ends.
The bottom line
Running a small business can be expensive. Having access to the funds from a business line of credit can help keep your business operating smoothly. The key is to never draw more from your line of credit than you can comfortably pay back.
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Writer
Dan Rafter is a freelance writer who has more than 20 years experience covering personal finance. He's written for the Chicago Tribune, Washington Post, Bankrate, CreditCards.com, Rocket Mortgage, NortonLifeLock and several others.
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