A business line of credit (LOC) can be an efficient way to finance your business, especially if you want the flexibility of borrowing only what you need and only paying interest on the funds you use. It can be a great way to cover short-term cash flow needs, sudden expenses or even major purchases. But you’ll need to meet minimum credit score, annual revenue and years in business requirements to qualify.
| Loan provider | Loan amount | Requirements | Finder rating | |
|---|---|---|---|---|
American Express® Business Line of Credit | $2,000 to $250,000 | 1+ year in business, 660 credit score, average monthly revenue of $3,000 | ★★★★★
| |
Backd | $10,000 to $750,000 | 1 year in business, 600+ FICO score, $300,000 annual revenue, business bank account | ★★★★★
| |
Bluevine | Up to $250,000 | 1+ year in business, corporation or LLC only, $10,000 in monthly revenue, 625+ credit score | ★★★★★
| |
Chase | $10,000 to $500,000 | Not stated | ||
Clarify Capital | Up to $5 million | $10,000 in monthly revenue, 550+ credit score, 6 months in business | ||
Fundbox | Up to $150,000 | 6+ months in business, $100,000+ in annual revenue, 600+ FICO score, business checking account | ★★★★★
| |
Idea Financial | Up to $275,000 | 3+ years in business, $15,000 in monthly revenue, 650 credit score, not a nonprofit or sole proprietorship | ★★★★★
| |
Lendio | $1,000 to $500,000 | Varies by lender — 600 to 650 credit score, 6 months to 2 years in business | ★★★★★
| |
National Business Capital | $100,000 to $10 million | 1+ year in business, $500,000+ in annual revenue | ||
OnDeck | $6,000 to $100,000 | 1 year in business, 625 FICO score, $100,000 annual revenue | ★★★★★
|
Lenders that offer business lines of credit typically charge interest rates from 8% to 60%, although some may go a bit higher or lower. To get the best rates, you’ll need to be an established business with good credit and strong revenues. You may also see extra charges, such as origination fees, draw fees, annual fees or monthly maintenance charges.
To give you an idea of how much a business line of credit may cost, check out this table that assumes a two-year loan term, with 80% usage of your credit limit and a 10% interest rate. Make sure you’re aware of additional fees charged — if any — because it adds to the loan’s total cost.
| Max line of credit | 80% of credit line used | Term | APR | Monthly payment | Total Interest paid | Total Cost |
|---|---|---|---|---|---|---|
$50,000 | $40,000 | 2 years | 10% | $1,845.80 | $4,299.20 | $44,299.20 |
$100,000 | $80,000 | 2 years | 10% | $3,691.59 | $8,598.16 | $88,598.16 |
$150,000 | $120,000 | 2 years | 10% | $5,537.39 | $12,897.36 | $132,897.36 |
$200,000 | $160,000 | 2 years | 10% | $7,383.19 | $17,196.56 | $177,196.50 |
$250,000 | $200,000 | 2 years | 10% | $9,228.99 | $21,495.76 | $221,495.76 |
$300,000 | $240,000 | 2 years | 10% | $11,074.78 | $25,794.72 | $265,794.72 |
$350,000 | $280,000 | 2 years | 10% | $12,920.58 | $30,093.92 | $310,093.12 |
$400,000 | $320,000 | 2 years | 10% | $14,766.38 | $34,393.12 | $354,393.12 |
$450,000 | $360,000 | 2 years | 10% | $16,612.17 | $38,692.08 | $398,692.08 |
$500,000 | $400,000 | 2 years | 10% | $18,457.97 | $42,991.28 | $442,991.28 |
Lenders that offer business lines of credit are typically concerned with your credit score, how long you’ve been in business and how much you make.
Follow these six steps to get a business line of credit:
The turnaround time for approval and funding varies by lender. Many online lenders with business lines of credit promise funding within 24 to 48 hours, and some LOCs may offer instant approval. However, there could be delays if you need to submit additional documentation.
Traditional banks and credit unions usually take a bit longer because they typically have more stringent requirements and loan processes.
There are a few strategies you can use to save money on interest charges.
If you can’t get a business line of credit or just want to explore other options, consider these alternatives:
That depends. If you’ve been in business for at least six months, some lenders may approve a LOC even if you’re a startup. If you haven’t been in business that long, approval odds are slim and you may need to wait a few months or seek alternative financing.
It can be harder to get any type of business loan if you have bad credit, but some lenders work with borrowers with bad credit. Clarify Capital, for example, accepts scores as low as 550. You may also want to consider business loans that don’t require a credit check.
Neither type of business financing is necessarily better than the other. It depends on your plans for the loan proceeds.
For example, if you know exactly how much you need, a term loan might be your best option. But a business line of credit might make more sense if you don’t know how much you’ll need or if you’d like to draw on your loan funds from time to time and only pay interest on what you borrow.
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