Business Line of Credit: How It Works and Best Options

Small Business, Small Business Loans
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A business line of credit provides flexibility that a regular business loan doesn’t. With a business line of credit, you can borrow up to a certain limit — say, $100,000 — and pay interest only on the portion of money that you borrow. You then draw and repay funds as you wish, as long as you don’t exceed your credit limit. A line of credit is similar to how credit cards work.

Need to manage cash flow? Buy inventory? Pay for a surprise expense? Then a business line of credit makes sense.

In this article

How a business line of credit works

How to qualify for a business line of credit

Business line of credit options

Business credit cards

Business line of credit: Summary of options

How a business line of credit works

A business line of credit differs from a term loan, which provides a one-time lump sum of cash upfront, repaid over a fixed timeframe.

With a line of credit, you can keep reusing and repaying it as often as you’d like, as long as you make payments on time and you don’t exceed your credit limit. Most lenders allow you to repay your balance in full early to save on interest costs.

Line of credit borrowing limits — typically ranging from $5,000 to $150,000 — are smaller than a term loan.

Business lines of credit with lower credit limits are typically unsecured, which means collateral such as real estate or inventory is not required.

How to qualify for a business line of credit

Most traditional lenders, such as banks, require businesses to have strong revenue and at least a few years of history to qualify for a line of credit. Larger lines of credit may require collateral, which can be seized by the lender if you fail to make payments.

To apply, lenders typically require the following documentation: personal and business tax returns, bank account information and business financial statements, such as profit-and-loss statements and a balance sheet.

Online business lenders typically have looser qualifications than banks. However, these lenders are also likely to charge higher rates than banks and may have lower credit limits.

At a minimum, you’ll need at least six months in business and $25,000 in annual revenue to qualify for a business line of credit. Although some lenders don’t set a minimum credit score, borrowers most likely will need a score of 500 or higher to qualify.

Business line of credit options

Here are our recommendations for business lines of credit from online lenders, based on maximum credit limit:

Business line of credit up to $100,000

Fundbox, StreetShares and OnDeck offer business lines of credit up to $100,000 for short-term financing needs.
fundbox
  • Loan amount: $1,000 to $100,000
  • APR: 15% to 59%
  • Loan term: 12 weeks
  • Funding time: As fast as next business day
  • Read our Fundbox review
Apply now At Fundbox

Fundbox is a solid option if your company is getting started because you can qualify after just six months in business. The company has no minimum credit score requirements and requires $25,000 or more in revenue.

If you want lower rates, StreetShares is a better option, but you need at least a year in business to qualify. Like Fundbox, the lender requires a minimum of $25,000 in annual revenue. An important caveat: Your maximum credit limit cannot exceed 20% of your annual business revenue. For example, a business with $100,000 in annual revenue could be approved for up to $20,000.

OnDeck is a good option if you want funding fast. You can get financing as quickly as 24 hours after approval. You need a minimum 600 credit score, with at least one year of business history and $100,000 revenue.

StreetShares-e1459274893272
  • Loan amount: $5,000 to $100,000
  • APR: 9% to 40%
  • Loan term: Three to 36 months
  • Funding time: One to five days
  • Read our StreetShares review
Apply now at StreetShares
OnDeck_logo_2017
  • Loan amount: Up to $100,000
  • APR: 14% to 40%
  • Loan term: Repaid weekly for up to six months
  • Funding time: As quickly as 24 hours but typically a few days
  • Read our OnDeck review
Apply now at OnDeck

 


Business line of credit up to $150,000

Kabbage and BlueVine offer fast funding for borrowers. 

Kabbage_Logo_150x40
  • Loan amount: $2,000 to $150,000
  • APR: 24% to 99%
  • Loan term: Six or 12 months
  • Funding time: A few minutes to several days
  • Read our Kabbage review
Apply now at Kabbage
bluevine-e1431706679103
  • Loan amount: $6,000 to $150,000
  • APR: 16% to 62%
  • Loan term: Six or 12 months months
  • Funding time: As fast as 12 hours
  • Read our BlueVine review
Apply now at BlueVine


Kabbage works best if you need fast funding for short-term needs and you have poor credit. The lender doesn’t require a minimum credit score for borrowers, although most have at least 500, according to the company. Your business needs a minimum of $50,000 in annual revenue and one year in operation to qualify. Kabbage’s annual percentage rates are higher than other options.

BlueVine is a better option if you want lower rates than Kabbage offers. Qualifying will likely be tougher with BlueVine, however, because the lender requires a minimum credit score of 600 and at least $120,000 in annual revenue.

Business credit cards

Business credit cards are also lines of credit, but differ from a traditional business line of credit in several ways.

A business line of credit provides a higher credit limit, may be secured by collateral and provides actual cash to your bank account when you make a draw. You can get cash through a business credit card, but you’ll be charged fees and a higher APR to do so. Other common fees for business credit cards include annual fees and late-payment fees.

Business credit cards work best for smaller ongoing expenses and for newer businesses without established finances, while a business line of credit works best for larger ongoing expenses and more mature businesses.

Just like personal credit cards, business credit cards can provide rewards or cash back for spending. Rewards are typically related to business expenses, such as office supplies, gas, internet and cable. They may also offer 0% interest promotions, which allow you to pay no interest on your balance for a specific time period after signing up for the card.

Business line of credit: Summary of options

 

bluevine

fundbox

Street Shares

kabbage

ondeck

Best for

Young businesses

Best for

Young businesses

Best for

Smaller purchases

Best for

Fast funding

Best for

Fast funding

Loan details

Loan amount

$6,000 - $150,000




APR

16% - 62%

Loan amount

$1,000 - $100,000




APR

15% - 59%

Loan amount

$5,000 - $100,000




APR

9% - 40%

Loan amount

$2,000 - $150,000




APR

24% - 99%

Loan amount

Up to $100,000





APR

14% - 40%

Minimum qualifications

Personal credit score

600
 




Annual revenue

$120,000




Time in business

6 months

Personal credit score

No minimum
 




Annual revenue

$25,000




Time in business

6 months

Personal credit score

600
 




Annual revenue

$25,000




Time in business

1 year

Personal credit score

No minimum





Annual revenue

$50,000




Time in business

1 year

Personal credit score

600
 




Annual revenue

$100,000




Time in business

1 year

Apply now at BlueVine
Apply now at Fundbox
Apply now at StreetShares
Apply now at Kabbage
Apply now at OnDeck

Find and compare small-business financing

To size up other types of small-business financing, check out NerdWallet’s loan comparison tool. We gauged lender trustworthiness, market scope and user experience, among other factors, and arranged them by categories that include your revenue and how long you’ve been in business.

Steve Nicastro is a staff writer at NerdWallet, a personal finance website. Email: Steven.N@nerdwallet.com. Twitter: @StevenNicastro.

Updated Nov. 20, 2017.