Best Secured Business Line of Credit Options
Best Secured Business Line of Credit Options
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SBA CAPLines of credit
Best for large funding amounts
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.50-14.00%
Pros
- Line of credit options for seasonal, working capital, building and contracting needs.
- Large maximum borrowing amounts.
- Competitive interest rates and repayment terms.
Cons
- Typically requires good credit and multiple years in business.
- Slow to fund.
- Collateral and/or down payment may be required.
SBA CAPLines of credit
Best for large funding amounts
Max loan amount
$5,000,000
Min. credit score
650
Est. APR
10.50-14.00%
Pros
- Line of credit options for seasonal, working capital, building and contracting needs.
- Large maximum borrowing amounts.
- Competitive interest rates and repayment terms.
Cons
- Typically requires good credit and multiple years in business.
- Slow to fund.
- Collateral and/or down payment may be required.
Max loan amount
Undisclosed
Min. credit score
670
Pros
- Available to borrowers with at least six months in business.
- No origination fee.
- Responsible spending can help you graduate to an unsecured credit line.
Cons
- Credit limit is based on the security deposit you provide.
- Must have a Bank of America checking or savings account to apply.
Bank of America Business Advantage Cash Secured Line of Credit
Best for new businesses
Max loan amount
Undisclosed
Min. credit score
670
Pros
- Available to borrowers with at least six months in business.
- No origination fee.
- Responsible spending can help you graduate to an unsecured credit line.
Cons
- Credit limit is based on the security deposit you provide.
- Must have a Bank of America checking or savings account to apply.
Max loan amount
$1,000,000
Min. credit score
680
Est. APR
8.00%
Pros
- High maximum credit line amount.
- Competitive interest rates and repayment terms.
Cons
- Can’t apply online.
- Origination fee charged at opening and annual renewal.
Wells Fargo Prime Line of Credit
Best for established businesses
Max loan amount
$1,000,000
Min. credit score
680
Est. APR
8.00%
Pros
- High maximum credit line amount.
- Competitive interest rates and repayment terms.
Cons
- Can’t apply online.
- Origination fee charged at opening and annual renewal.
Max loan amount
$250,000
Min. credit score
660
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Pros
- Streamlined application process with minimal paperwork.
- Financing from $2,000 to $250,000 available.
- Accepts borrowers with a minimum FICO score of at least 660 at the time of application.
- Monthly repayment schedule (as opposed to daily or weekly).
- No prepayment penalties, account maintenance fees or draw fees.
Cons
- Must have online checking or PayPal account to verify cash flow.
- Complex monthly fee structure makes it difficult to compare costs to other lenders.
American Express® Business Line of Credit*
Best for low-revenue businesses
Max loan amount
$250,000
Min. credit score
660
Learn More
with Fundera by NerdWallet
Pros
- Streamlined application process with minimal paperwork.
- Financing from $2,000 to $250,000 available.
- Accepts borrowers with a minimum FICO score of at least 660 at the time of application.
- Monthly repayment schedule (as opposed to daily or weekly).
- No prepayment penalties, account maintenance fees or draw fees.
Cons
- Must have online checking or PayPal account to verify cash flow.
- Complex monthly fee structure makes it difficult to compare costs to other lenders.
Max loan amount
Undisclosed
Min. credit score
Undisclosed
Pros
- Bank line of credit with competitive interest rates.
- Lender reports to business credit bureaus.
- Bank of America’s Preferred Rewards for Business program can offer interest rate discounts and other perks.
Cons
- Can be slow to fund.
- High annual revenue requirement.
- Charges an origination fee.
- Prepayment fees may apply to early repayments.
Bank of America Business Advantage Secured Line of Credit
Best for low interest rates
Max loan amount
Undisclosed
Min. credit score
Undisclosed
Pros
- Bank line of credit with competitive interest rates.
- Lender reports to business credit bureaus.
- Bank of America’s Preferred Rewards for Business program can offer interest rate discounts and other perks.
Cons
- Can be slow to fund.
- High annual revenue requirement.
- Charges an origination fee.
- Prepayment fees may apply to early repayments.
What is a secured business line of credit?
A secured business line of credit is backed by specific collateral, typically tangible business assets like property, equipment or inventory. If you can’t repay your credit line, your lender can seize your pledged assets to recover its losses.
Providing collateral reduces risk for the lender — allowing you to access the most competitive interest rates and repayment terms. This security can also help strengthen your small-business loan application, especially if you’re a newer business or have a rocky credit history.
Some lenders may also require a personal guarantee and/or a Uniform Commercial Code (UCC) filing — in addition to specific collateral.
A personal guarantee holds you personally responsible for the debt if your business can’t pay, and a UCC filing allows your lender to seize your business assets if you default. These documents provide further protection for your lender to ensure that your credit line is repaid.
How does a secured business line of credit work?
Like any other business line of credit, a secured credit line allows you to borrow from a set limit of funds and only pay interest on the money you borrow.
Then, you repay what you’ve borrowed over time — usually on a weekly or monthly schedule.
You can continue to draw on your credit line, as needed, provided that you make timely payments and don’t exceed your credit limit.
Unsecured vs. secured business line of credit
Unlike secured lines of credit, unsecured business lines of credit are not backed by physical collateral. These credit lines may, however, require a personal guarantee and/or UCC lien.
Despite the terminology, it’s unlikely that you’ll find an unsecured line of credit that doesn’t include any protection for the lender.
When you don’t provide collateral, lenders may see your business as more of a risk. As a result, unsecured lines of credit tend to have lower funding amounts, shorter repayment terms and higher interest rates compared with secured credit lines.
Pros and cons of a secured business line of credit
Pros
Providing collateral offsets some of a lender’s risk, which may help you qualify for more competitive interest rates and terms.
Offering collateral can help strengthen your application, especially if you’re a startup or have poor credit history.
Cons
A lender will typically require documentation about the asset you’re pledging as collateral, and possibly conduct an appraisal, which can slow the application process.
You may be at risk of losing your assets if you fail to repay your line of credit.
Why you might choose a secured business line of credit
- You have collateral. If you have business assets like vehicles, large equipment, commercial real estate or even cash, you may consider using it to make your credit application more attractive to lenders.
- You want more competitive rates and terms. Securing your line of credit with valuable collateral reduces a lender’s risk, which can lead to lower interest rates and more favorable repayment terms for your business.
- You’re looking to build business credit. If your lender reports to business credit bureaus, secured business lines of credit can be a great way to build business credit, though you’ll need to make sure you use the line responsibly and make on-time payments. Established business credit can help your business access more capital, with more affordable rates and terms in the future.
- You want flexible financing. Securing a business line of credit can allow you to access a flexible form of financing. Having a line of credit means you can access capital fairly quickly as needed, but you only pay interest on the amount you draw.
Minimum requirements for a secured business line of credit
Where to get a secured business line of credit
Secured business lines of credit are available from traditional and online lenders. The right option for you will depend on factors such as funding needs, speed, interest rates and qualifications, among others.
Banks and credit unions
Banks and credit unions will typically provide credit lines with the most competitive interest rates and terms. These lenders may offer different ways to secure your line of credit — like a certificate of deposit or non-real estate business assets.
To qualify, however, you’ll generally need multiple years in business, good credit and strong finances. Business bank loans are also slow to fund. Wells Fargo’s secured credit line, for example, takes up to two weeks just for processing after you’ve submitted your documentation.
SBA lenders
SBA lenders, usually banks and credit unions, provide secured credit lines through the CAPLines program, which is part of the 7(a) loan program.
There are four types of these SBA lines of credit, designed for specific use cases, such as working capital, seasonal slows and contract orders. To qualify, you’ll need to meet standard requirements for the SBA 7(a) loan program as well as criteria for the individual credit line you need. Collateral requirements also vary based on the specific credit line.
If you’re looking specifically for a working capital line of credit, you might consider the SBA 7(a) Working Capital Pilot program. This pilot program allows business owners to borrow against their accounts receivable and inventory. You may be able to qualify if you’ve been generating revenue for 12 months or more.
» MORE: How to qualify for an SBA loan
Online lenders
Online lenders tend to provide fast, flexible funding. Compared with bank and SBA lenders, these companies typically have more lenient qualification requirements but higher interest rates.
Although some online lenders may issue secured credit lines, many offer unsecured lines of credit instead. If you need faster access to working capital but don’t want to pay a premium on speed and flexibility, you might try talking to an online lender about its collateral policies.
Though the lender may not require collateral, it may allow you to secure your line of credit to access more competitive terms.
Last updated on September 27, 2024
Methodology
NerdWallet’s review process evaluates and rates small-business loan products from traditional banks and online lenders. We collect over 30 data points on each lender using company websites and public documents. We may also go through a lender’s initial application flow and reach out to company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer small-business friendly features, including:
- Transparency of rates and terms.
- Flexible payment options.
- Fast funding times.
- Accessible customer service.
- Reporting of payments to business credit bureaus.
- Responsible lending practices.
We weigh these factors based on our assessment of which are the most important to small-business owners and how meaningfully they impact borrowers’ experiences.
NerdWallet does not receive compensation for our star ratings. Read more about our ratings methodology for small-business loans and our editorial guidelines.
Wondering if you qualify?
It’s possible to get a business loan even if you have bad credit. Bad-credit business loans are available from alternative sources, like online or nonprofit lenders.
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Frequently Asked Questions
You typically secure a business line of credit with tangible assets such as: property, equipment, inventory, supplies, invoices, cash or savings.
To qualify for a secured business line of credit, you’ll usually need to provide collateral with a value equal to or greater than your desired funding amount. Although startups and borrowers with bad credit may be able to qualify for certain products, good credit and strong finances will help you access the best options.
You can build your business credit by making timely payments on your secured credit line and establishing a positive account history. You’ll want to make sure that your lender reports this information to the commercial credit bureaus — because if it doesn’t, your activity will not affect your business credit score.