How a Business Line of Credit Works and Where to Get It
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Following the recent tariff announcements, many small-business owners are facing greater financial strain and uncertainty about the future. A business line of credit can be a useful tool during this time — allow you to draw funds as needed and only pay interest on the money you borrow. A business line of credit can help you cover an increase in costs, manage cash flow interruptions or serve as an emergency fund.
What is a business line of credit?
A business line of credit is a type of small-business loan that allows you to borrow up to a certain limit and only pay interest on the money you borrow — similar to the way a credit card works. You then repay the funds over time, typically on a weekly or monthly schedule.
As you repay what you’ve borrowed, you can continue to draw on the line — provided your payments are on time and you don’t exceed your credit limit.
How much do you need?
We’ll start with a brief questionnaire to better understand the unique needs of your business.
Once we uncover your personalized matches, our team will consult you on the process moving forward.
How to qualify for a business line of credit
Minimum Requirements
Some online lenders will accept credit scores as low as 600, but traditional lenders will likely require strong credit. A higher credit score can help you qualify for the best rates and terms.
Most traditional lenders will want to see at least two years in business. Online lenders are more likely to work with startups, provided they have a minimum of six months in operation.
Businesses with lower revenue may still qualify for a line of credit. To get a bank business loan or SBA loan, however, you'll likely need annual revenue upward of $100,000.
Pros and cons of business lines of credit
Good option for working capital, short-term expenses and emergency funding needs.
Only pay interest on funds you draw, not the total credit limit.
May be easier to qualify for than traditional term loans.
Can be used to build business credit.
Not suitable for large purchases or investments.
May include a variety of fees that can add to overall cost.
Often have shorter repayment terms and lower funding amounts than traditional term loans.
The 7 best business lines of credit
| Product | Max Loan Amount | Min Credit | Min Time In Business | Min Annual Revenue | Learn more |
|---|---|---|---|---|---|
 SBA CAPLines of credit Apply now with Fundera by NerdWallet | $5,000,000 | 650 | 24 months | Undisclosed | Apply now with Fundera by NerdWallet |
 Backd - Line of credit NerdWallet Rating Apply now with Fundera by NerdWallet | $750,000 | 600 | 12 months | $300,000 | Apply now with Fundera by NerdWallet |
 Bluevine - Line of credit NerdWallet Rating Apply now with Fundera by NerdWallet | $250,000 | 625 | 12 months | $120,000 | Apply now with Fundera by NerdWallet |
 Headway Capital - Line of credit NerdWallet Rating Apply now with Fundera by NerdWallet | $100,000 | 625 | 6 months | $50,000 | Apply now with Fundera by NerdWallet |
 OnDeck - Line of credit NerdWallet Rating Apply now with Fundera by NerdWallet | $100,000 | 625 | 12 months | $100,000 | Apply now with Fundera by NerdWallet |
 Wells Fargo BusinessLine® Line of Credit NerdWallet Rating Apply now with Fundera by NerdWallet | $150,000 | 680 | 24 months | Undisclosed | Apply now with Fundera by NerdWallet |
 Bank of America Business Advantage Cash Secured Line of Credit NerdWallet Rating | Undisclosed | 670 | 6 months | $50,000 |
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Where to get a business line of credit
Banks and credit unions
Banks and credit unions typically offer the most competitive rates and terms on a business line of credit. To qualify, however, you’ll usually need to meet strict eligibility requirements, such as strong revenue, good credit and several years in business.
Compared to online lenders, banks and credit unions can also be more likely to require physical collateral to secure your credit line (especially for larger limits), as well as more likely to charge additional fees, such as annual or inactivity fees.
SBA lenders
Some banks and credit unions also offer SBA CAPLines of credit. These SBA lines of credit are part of the 7(a) program, offering funding up to $5 million. There are four different credit line options based on your industry and financing needs.
Although you’ll still need to meet strong qualifications to get an SBA line of credit, these products may be slightly easier to access than traditional bank credit lines. Like business bank loans, however, these SBA lines of credit require a detailed application process and will likely be slow to fund.
Online lenders
Online lenders are a good option for startup business lines of credit or bad credit borrowers as they generally have more flexible business line of credit requirements compared with banks and credit unions.
Online lenders typically have streamlined application processes and fewer fees, and may be able to issue small-business lines of credit in a matter of days. However, these lenders are also likely to charge higher interest rates than banks and may have lower credit limits.
Secured vs. unsecured lines of credit
Secured business line of credit
A secured business line of credit requires you to put up assets such as inventory or property as collateral. If you fail to pay back the credit line, your lender could seize your assets.
Because secured lines of credit help mitigate risk for the lender, these products often have more competitive rates and terms than unsecured options.
Unsecured business line of credit
An unsecured business line of credit doesn’t require physical collateral, but some lenders may still require a personal guarantee or a lien on your business’s assets.
A personal guarantee gives a lender the right to go after your personal assets, like your house, if you default on a loan. A UCC lien is similar; a lender can seize your business assets if you haven’t repaid a loan.
How to compare business lines of credit
When trying to choose the best business line of credit for your needs, you’ll want to compare factors such as:
Maximum funding amount. If you think you need a large credit limit, bank or SBA lenders may be a better option. Keep in mind that many banks also offer commercial lines of credit, which are designed to meet the needs of mid-size, high-revenue businesses.
Repayment schedule. Business lines of credit may require daily, weekly or monthly repayment. Consider your budget and cash flow to determine the type of repayment you can afford.
Interest rates. Current business line of credit rates can range from 10% to 99% APR. In general, the stronger your credentials, the lower interest rates you’ll receive. Banks tend to offer more competitive business line of credit rates compared with online lenders. As you compare interest rates, consider whether a lender offers fixed or variable rates.
Additional fees. Origination, draw and account maintenance fees can increase the overall cost of your business line of credit. You should make sure you understand any additional fees a lender charges and ask questions if the fees are unclear. You’ll also want to determine if the lender charges prepayment penalties for repaying early.
Funding speed. If you need business capital quickly, you may be able to get it from an online lender in just a few days. Although traditional lenders may take anywhere from days to weeks to provide funding, you’ll likely get a lower interest rate with these options.
Lender reputation. Reading online reviews or talking to other business owners can help you get a sense of what it may be like to work with a particular lender. Although there are many reputable online lenders, be wary of any company that offers “guaranteed approval” or makes similar promises that seem too good to be true.