A small business line of credit (LOC) gives your business access to the on-demand funds it needs to grow or cover cash flow gaps and everyday expenses. More flexible than a small business loan and usually less expensive than a credit card, LOCs are a great way to make sure you’re prepared for whatever unexpected short-term costs come your way.
Lendzi is a highly rated business loans marketplace with more than 60 lending partners. It allows you to check rates and terms from multiple lenders that offer business lines of credit to find the best deal for your situation. While it doesn't reveal specific requirements to qualify for business loans, it doesn't have a minimum credit score requirement, so there are solutions for borrowers with less-than-perfect credit. It also offers the potential for fast funding and the opportunity to talk to a loan specialist — rather than applying online — if you need someone to guide you through your options.
Rapid Finance automatically provides a prepaid Mastercard to eligible customers who have a small business line of credit with the company. This gives borrowers almost instant access to funds without having to wait for ACH withdrawals to go through, which can take up to three business days. Rapid Finance offers LOCs up to $250,000 with loan terms of three to 18 months. But it doesn't list the rates or fees on its website, and it may require weekly or daily repayments in some cases.
Pros
Faster access to funds with prepaid card
LOCs up to $250,000
Flexible loan terms
Cons
Doesn't disclose rates and fees
Could require daily repayments
Loan term could change after each draw
Loan amount
$5,000 to $250,000
APR
Undisclosed
Loan term
3 to 18 months
Requirements
Valid ID, business bank account, last three months of business bank statements
One of the drawbacks to a business line of credit is that it often comes with more fees than other loan options. But Bluevine's LOC doesn't charge many of the common fees, such as setup, subscription, maintenance and termination fees. It also offers low rates, starting at 7.8% on credit lines up to $250,000, and funding is possible within 24 hours. But it charges draw fees and only accepts LLCs and corporations. You'll also need to be in business for at least a year and have a credit score of 625 or more.
Pros
Charges minimal fees
Rates start at 7.8%
Unlimited withdrawals (subject to approval)
Cons
Charges draw fees
Corporations and LLCs only
Minimum 625 credit score
Loan amount
Up to $250,000
APR
As low as 7.8%
Min. Credit Score
625
Loan term
Up to 12 months
Requirements
1 year in business, corporation or LLC, 625 FICO score, $120,000 in annual revenue, no bankruptcies
U.S. Bank offers unsecured Cash Flow Manager LOCs up to $100,000 and secured lines up to $250,000, and it waives the annual fee if your credit limit is more than $50,000. You may also want to consider its Reserve Line for up to $5,000 in overdraft protection on your U.S. Bank business checking account, which can make for a handy emergency fund. But its lowest LOC is for $10,000 — which is higher than some — and it doesn't disclose rates and terms on its website. Plus, it may offer larger credit limits, but you'll need to make an appointment to find out more.
OnDeck only requires a 625 credit score to qualify for a business line of credit, which is lower than some of its competitors. It's also open to companies with only one year in business and revenues as low as $100,000 annually. Its credit limits range from $6,000 to $100,000, with flexible loan terms from 12 to 24 months. But it may require a minimum draw at origination, its average rate is 57.1% and its highest loan amount is lower than much of the competition.
Pros
Fair credit accepted
Lenient revenue and time in business requirements
Flexible loan terms
Cons
Average rates are relatively high
May require a minimum initial draw
Highest credit limit is lower than some
Loan amount
$6,000 to $100,000
APR
35.9%
Min. Credit Score
625
Loan term
12, 18 or 24 months
Requirements
1 year in business, 625 FICO score, $100,000 in annual revenues, business checking account
While most lenders that offer LOCs top out at $250,000 to $500,000, Clarify Capital offers business lines of credit up to $5 million through its lending partners. Rates start as low as 5%, and it offers loan terms from six to 18 months. It also considers borrowers with credit scores as low as 550, and you only need six months in business, although you'll likely need better qualifications to qualify for the best rates and terms. Plus, it doesn't disclose additional fees, which are common for business LOCs.
Pros
Up to $5 million in funding
Accepts poor credit
No prepayment penalties
Cons
Lowest rates reserved for good to excellent credit
Doesn't disclose LOC fees
Longest loan term is 18 months
Loan amount
Up to $5 million
APR
As low as 5%
Min. Credit Score
550
Requirements
6 months in business, 550+ credit score
Loan amount
Up to $5 million
APR
As low as 5%
Min. Credit Score
550
Methodology: How we chose these lenders
Finder’s business loan experts analyzed dozens of lenders that provide small business lines of credit. We ultimately chose lenders that offer fast funding, competitive rates and terms, a variety of loan amounts and those that consider borrowers with a range of credit scores, annual revenues and time in business.
Some of the criteria we evaluate include:
Interest rates
Additional fees
Loan amounts
Loan terms
Repayment plans
Turnaround times
Credit score requirements
Time in business requirements
Revenue requirements
Reputation of the lender
Better Business Bureau and Trustpilot reviews
Finder also maintains strict editorial integrity and independence. Our content and suggestions are fair, accurate and trustworthy, and our advertisers or partners don’t influence our opinions. To learn more, check out our editorial guidelines here.
How to compare small business lines of credit
Consider these factors when choosing the best business line of credit for your company:
Rates. Interest rates vary for business lines of credit. Be sure to compare multiple lenders to find the most competitive rates.
Fees. Business lines of credit typically charge fees on top of interest, including annual, maintenance and draw fees, among others. To save money on your LOC, look for lenders that have minimal fees.
Lender requirements. LOC lenders typically have minimum credit score, revenue and time in business requirements. Check to see if you meet the criteria before you apply.
Turnaround times. Some lenders may be able to provide fast approval and funding on a business LOC — within one to two business days — but others could take up to two weeks.
Loan terms. Lines of credit typically have loan terms of 24 months or less — and may require daily or weekly repayments. Check your budget to make sure you can manage the repayment schedule.
What is a small business line of credit and how does it work?
A business LOC is a type of working capital business loan that works a lot like a business credit card with one key difference: You receive the funds as cash. Business LOCs typically have a credit limit between $1,000 and $250,000, which you can withdraw from as needed. Some banks and online lenders even offer business credit lines up to $500K or in the millions.
In some cases, each withdrawal turns into a short-term loan, which you repay plus interest and fees. Or you may only be required to make a minimum monthly payment on the balance — similar to the way you pay off a credit card.
Most business credit lines are revolving, meaning the balance replenishes as you pay off your withdrawal. But, a few lenders offer nonrevolving LOCs, which can’t be reused after you pay it off.
After applying for a credit line, it may take a few weeks to get funding — usually up to two weeks, though unsecured LOCs typically have faster turnaround times. Online lenders tend to provide the quickest funding, some as soon as a day or two after getting approved.
Pros and cons of business lines of credit
Lines of credit can be highly beneficial to small businesses, but there are some highlights and drawbacks worth noting before you sign up.
Pros
Low-cost emergency financing. LOCs offer a safety net for unexpected costs, helping you avoid expensive short-term loans.
Pay on what you borrow. You only pay interest on what you use rather than taking out a larger term loan that could be more than you need.
Less expensive than credit cards. You can often qualify for lower rates and fees than a credit card, helping you save on regular expenses.
Cash not credit. LOCs offer cash for costs that you can’t throw on a credit card, like payroll, hiring contractors and paying rent or utilities.
Build lender relationships. A LOC can help you develop a long-term relationship with a lender, which can lead to lower rates and loyalty discounts down the road — and build business credit.
Cons
Lower amounts. Credit limits are often lower than term loans, making it less than ideal for a large, one-time expense.
Minimum draw requirements. Minimum withdrawal requirements can force your business to borrow more than it needs.
Extra fees. Business LOCs often have more fees than a term loan, such as draw fees, annual fees or maintenance fees.
Variable rates. Variable interest rates are more common with lines of credit, and these typically increase when the economy is doing well and decrease during a downswing.
The Finder Score crunches 12+ types of business loans across 35+ lenders. It takes into account the product's interest rate, fees and features, as well as the type of loan eg investor, variable, fixed rate - this gives you a simple score out of 10.
To provide a Score, we compare like-for-like loans. So if you're comparing the best business loans for startups loans, you can see how each business loan stacks up against other business loans with the same borrower type, rate type and repayment type.
Retail businesses or others that have a lot of credit card sales
How to qualify for small business lines of credit
Many lenders look at your business’s cash flow and your history of paying off business debts. Base requirements for a small business LOC typically are:
At least six months to one year in business
Annual revenue of at least $100,000
A personal credit score of 670
Many lenders rely on your personal credit score when you apply. But some might ask to see a business credit report — especially if you’re applying for a larger line of credit from a bank. Even if a lender considers your business credit score, you typically need good personal credit, or a score over 670, to qualify. Getting business loans with fair credit is possible, but your line of credit options are limited with a credit score below 580.
How to apply for an LOC
Applying for a small business line of credit may vary by lender, but here are the basic steps to follow.
Decide what you need. The credit limit you qualify for will ultimately depend on your qualifications, but you should know roughly how much you need before accepting an offer.
Assess your budget. Calculate how much you can afford to repay the loan, keeping in mind that LOCs typically have short terms and some lenders may require weekly or even daily payments.
Research lender requirements. Most lenders have minimum credit, revenue and time-in-business requirements — look for lenders with criteria you can meet.
Compare lenders. Once you’ve narrowed your search, compare rates, fees and loan terms to find the best deal based on your qualifications.
Prepare your documents. Get a list of the documents you need to submit so you have everything ready for your loan application.
Apply. Follow the instructions to fill out your loan application and submit any required documents. Some lenders may give you a decision the same day you apply.
Review and sign. If approved, review the terms before you sign, paying careful attention to rates, fees and loan terms.
Alternatives to small business lines of credit
If you don’t think you’ll qualify for a business line of credit or just want to consider all your options, consider the alternatives.
Business credit card. It’s typically easier to qualify for a business credit card than an LOC, but loan amounts are usually smaller.
Personal line of credit. If you don’t qualify for a business LOC, you may want to consider a personal line of credit instead.
Home equity line of credit (HELOC). Homeowners may be able to qualify for a HELOC, which is a line of credit backed by your home’s equity. Another option is a home equity loan, which offers a lump sum payment rather than a credit line.
Personal loan. Many owners use a personal loan to finance business expenses, which may be easier to qualify for than a business loan, but you’ll need good credit to get the most competitive rates.
Frequently asked questions
What is the minimum credit score for a business line of credit?
Some lenders may accept credit scores as low as 550 to qualify for a line of credit, but a score of 670 or higher helps you get the most competitive rates.
What is the average line of credit for a small business?
Lenders typically offer credit lines from $5,000 to $250,000, although some go as high as $500,000 or even into the millions.
Can I get a business line of credit to start a business?
Probably not. Lenders that offer business LOCs typically have minimum revenue requirements to qualify, so if you don’t have money coming in yet, you probably won’t be approved. However, you could try applying for a business credit card, a personal loan or a personal line of credit to get your business off the ground.
Lacey Stark is a freelance personal finance writer for Finder, specializing
in banking, loans, investing, estate planning, and more. She has 20
years of experience writing and editing for magazines, newspapers, and
online publications. A word nerd from childhood, Lacey officially got her
start reporting on live sporting events and moved on to cover topics
such as construction, technology, and travel before finding her niche in
personal finance. Originally from New England, she received her
bachelor’s degree from the University of Denver and completed a
postgraduate journalism program at Metropolitan State University also
in Denver. She currently lives in Chicagoland with her dog Chunk and
likes to read and play golf. See full bio
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