Business Loan vs. Line of Credit: Which Is Right for You?
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Concerned about tariffs?
- Need emergency funding? Consider a business line of credit.
- Looking for fast access to working capital? Discover the best working capital loans.
- Want tips on how to mitigate the impact of tariffs? Read our guide.
How much do you need?
What is a business loan?
Pros
You can usually borrow more with a loan than you can with a line of credit.
In most cases, you’ll receive all your loan funds in one upfront payment.
Cons
You'll typically need to secure a loan with collateral like real estate, inventory or cash savings.
Some types of business loans can only be used for specific purposes — for instance, if you take out an equipment loan, you can’t use it to pay your employees during a lean month.
What is a business line of credit?
Pros
Lines of credit can be used for any business expense.
Some lines of credit are unsecured, meaning you won’t have to provide physical collateral.
Cons
Lines of credit tend to be smaller than business loans.
Lines of credit can come with additional fees such as annual, draw or inactivity fees.
Business line of credit vs. loan: How to choose
| Business loan | Business line of credit | |
|---|---|---|
| Amount of financing | Varies widely, but loans usually offer more financing than lines of credit. | Varies widely, but lines of credit are usually smaller than loans. |
| Financing purpose | A specific purpose. In your loan application, you’ll have to explain what you plan to do with your loan funds. | Can be used for any purpose. |
| Repayment terms | Installment credit — you receive a lump sum and pay it back in regular installments over time. | Revolving credit — you can carry a balance that accrues interest and pay it back as you’re able, then borrow more. |
| Collateral requirement | Almost always requires collateral. | May require a personal guarantee or UCC lien. |
| Credit requirements | Tends to require good credit, multiple years in business and more annual revenue. | Usually easier to qualify for than business loans. |
Where to get a business loan or line of credit
Bank business loans and lines of credit
| Product | Max loan amount | Min. credit score | |
|---|---|---|---|
 Bank of America Business Advantage Unsecured Term Loan Nerdwallet Rating with Fundera by NerdWallet | $100,000 | 700 | with Fundera by NerdWallet |
 Wells Fargo BusinessLine® Line of Credit Nerdwallet Rating with Fundera by NerdWallet | $150,000 | 680 | with Fundera by NerdWallet |
 Chase - Business line of credit | $500,000 | 700 | |
| Bank of America Business Advantage Unsecured Line of Credit Nerdwallet Rating | Undisclosed | 700 |
Online business loans and lines of credit
| Product | Max loan amount | Min. credit score | |
|---|---|---|---|
 Bluevine - Line of credit Nerdwallet Rating with Fundera by NerdWallet | $250,000 | 625 | with Fundera by NerdWallet |
 OnDeck - Online term loan Nerdwallet Rating with Fundera by NerdWallet | $250,000 | 625 | with Fundera by NerdWallet |
| OnDeck - Line of credit Nerdwallet Rating with Fundera by NerdWallet | $200,000 | 625 | with Fundera by NerdWallet |
 iBusiness Funding - Online term loan Nerdwallet Rating with Fundera by NerdWallet | $500,000 | 660 | with Fundera by NerdWallet |
 American Express® Business Line of Credit* Nerdwallet Rating | $250,000 | 660 |
