A business line of credit offers small businesses flexibility to manage cash flow. You can borrow any amount you need and pay interest only on the amount you withdraw. These loans are efficient and economical. Below, you’ll find our picks for the best business line of credit on the market.
Reviewed by: Sarah Brooks, Personal Finance Writer and Editor
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American Express Business Blueprint™ - Best for Fair Monthly Revenues
Monthly fee: 3-9% for 6 month loans, 6-18% for 12-month loans, 9-27% for 18-month loans
Loan amounts ranging from $2,000 to $250,000
No prepayment penalties and no origination fees
Convenient application process
Pros & Cons
Straightforward online applications
No prepayment penalty
Great for borrowers with fair monthly revenues
Excellent customer service
Personal guarantee required
Complicated monthly fee structure
Fees can be high
American Express Business BlueprintTM includes the American Express® Business Line of Credit, among other products. A business line of credit may be a solid choice for small business owners in need of working capital loans, equipment loans, emergency loans, and more. Borrowers with at least 12 months in business and a minimum credit score of 640 may enjoy a credit line between $2,000 and $250,000. However, all businesses are unique and are subject to approval and review. You’ll repay each draw as an individual installment business loan, and the monthly fee you pay can vary depending on creditworthiness, repayment term, and more.
American Express Business Blueprint differs from other lenders in several ways. The lender treats each draw from your line of credit as an individual installment loan. You must repay each loan in either 6, 12, or 18 months, depending on the amount you borrow. Instead of an interest rate, American Express charges a monthly fee each month you owe an outstanding balance. The lender provides a comparison tool in your loan agreement to show how its monthly fees would compare to a standard APR.
An American Express Business Line of Credit may work well for small business borrowers without perfect credit, but the fees the lender charges can be high when you calculate their comparable APR.
Flexible payment options: Daily, weekly, or semi-monthly
Not available to startups: Must be in business for one year
Not all industries qualify
Rates not disclosed
Backd has a unique business model in that they tailor their loans to each individual business. Backd was founded in 2018 and so far have helped fund more than $1 billion to over 10,000 small businesses. If your small business is in need of a large loan amount, flexible payment options, and a loan tailored to your specific practice, Backd can help provide you with the funding you need.
Main Features Backd offers two types of business loans: working capital loans and business lines of credit. If you need regular access to funding, abusiness line of credit may be your best choice. Rather than receive one lump sum, you receive a line of credit that you can draw on as-needed. Once you pay it back, you can use it again. Lines of credit range from $10,000 to $750,000 and terms are unlimited.
To qualify, you need to be in business for one year and have $100,000 or more in annual revenues.
Backd wants to get your business the funds it needs to succeed. They are willing to work with you to figure out the best funding solution for your business. The application is easy to fill out and does not affect your credit score. If you’re looking for large loan amounts that come with flexibility, Backd could be the lender for you.
Excellent customer reviews on independent review sites
Pros & Cons
Multiple lenders to choose from
Poor credit is accepted
Thousands of 5-star reviews
Rates can be high for those with poor credit
Annual income requirements may be high
Lendzi was founded in 2020 and partners with more than 75 lenders, making them an excellent choice for those that are looking to explore their options. They are also a direct lender themselves, offering a line of credit up to $250,000 to qualified borrowers. One thing that makes Lendzi stick out amongst other lenders is their willingness to work with business owners who have previously been denied a loan. If this sounds like you, we recommend inquiring with Lendzi.
Lendzi offers business lines of credit directly to borrowers up to $250,000 with terms of six to 12 months. Rates start at 6.20% for 26-week payments. Applying takes just a few minutes and will not impact your credit score. From there, a representative from Lendzi will give you a call to find out more about your business and review your options together. This is an excellent perk, as having someone to guide you along the way can make the process much simpler and more enjoyable. To qualify, Lendzi prefers a credit score of 625 and $180,000 in annual revenue.
Lendzi is ideal for business owners who have either been denied a loan elsewhere or are struggling to decide which lender is right for them. If you are looking for guidance along the way and have questions throughout the process, we recommend giving Lendzi a chance to meet your small business funding needs.
Bluevine offers a business line of credit with the potential for high credit limits (up to $250,000) and low interest rates (as low as 4.8%) for well-qualified borrowers. Not only can Bluevine’s terms compete with traditional financial institutions, it also offers a streamlined application common to online lenders.
Your business will need to be in operation for at least six months to qualify for a line of credit from Bluevine—a time requirement that’s half of what some other lenders require. However, the lender also has a minimum monthly revenue requirement of $10,000, which could be difficult for some to satisfy. You must repay each draw within six or 12 months, and the lender offers both fixed weekly and monthly payment options.
A business line of credit from Bluevine may be a good fit for companies with limited time in business and fair personal credit scores. Well-qualified borrowers looking for low interest rates or higher credit limits may be interested in working with Bluevine, as well.
GoKapital offers early payment discounts to those that are able to pay their line off sooner than it’s due. If you need a chunk of money (up to $55,000) and know you can pay it off prior to one year, GoKapital is worth looking into.
GoKapital business lines of credit range from $5,000 to $55,000 with terms of six, nine, or 12 months. Payments are made weekly, and you only pay for the funds that you use. To qualify, you need to have a minimum credit score of 620 and be in business for at least three years. You also must have $240,000 per year in annual revenue.
A line of credit from GoKapital makes the most sense for businesses in need of a large chunk of cash that they can pay off relatively quickly. You may need to remodel a bathroom, purchase additional inventory, or pay additional employees during a busy season. If that’s the case, a line of credit from GoKapital could be the best fit for you.
Fundbox offers unsecured business lines of credit with competitive interest rates starting at 4.66%. The online lender extends business lines of credit up to $150,000 to qualified borrowers as soon as the next business day after approval.
Furthermore, borrowers only need a fair minimum personal credit score of 600 to qualify for a business line of credit with Fundbox. However, the lender’s repayment terms may be tighter than you encounter elsewhere.
Fundbox borrowers may qualify for a line of credit as high as $150,000 and an APR between 4.66% to 8.99%. The lender requires weekly payments with an automatic debit from your business checking account, and the repayment term is a short 12- or 24-week time frame. Small business borrowers need a FICO Score® of 600, at least $100,000 in annual revenue, and ideally six months or more in business.
A business line of credit from Fundbox may be a good fit for well-qualified borrowers looking for competitive interest rates.
In this review, our experts highlight the rates, fees and terms of each lender and explain what makes them a good option. We also share potential downsides of each lender, and provide a rating methodology you can use to select the best option for your needs.
Nearly 25% of borrowers turn to online lenders to get the financing they need, according to a report from the Federal Reserve. However, not all lenders offer the same terms for business loan products and lines of credit.
A Business Line of Credit (LOC) is a flexible, short-term financing option used to cover payroll, purchase inventory, handle emergency expenses, finance growth opportunities, and more. It differs from a small business loan in that instead of being given a lump sum of money, you only draw on the specific amount you need.
How We Choose the Best Business Line of Credit
When choosing a line of credit for your business, there are numerous details you’ll want to review. Below are some of the key factors our experts considered when ranking the top lenders.
Qualification Process: Can your business satisfy a lender’s credit score requirements, stated annual revenue, time in business, etc.? If not, that business line of credit is probably a poor fit for you.
Interest Rates and Fees: Consider both interest rates and fees to get a clear picture of the cost of borrowing. Note that some LOCs might feature usage fees, origination fees, or maintenance fees that could offset the perceived savings of a lower rate.
Other Loan Features: Details like the maximum credit line available, repayment term (i.e., weekly vs. monthly), and more matter when you’re shopping for a business LOC.
Application Process: Pay attention to each lender’s process and funding speed. Online lenders often offer faster funding; whereas SBA lenders and traditional financial institutions may take weeks or even months for funding.
Customer Support: The level of customer support a lender offers is another important detail to consider. Can you talk to a live representative? Are the business hours convenient? Answers to such questions matter when choosing the best business LOC for your company.
Online User Reviews: No lender has a perfect track record in terms of customer satisfaction, yet independent review sites like Trustpilot can help you spot red flags and discover whether the lender has a better or worse reputation than average.
Perks and Bonuses: Some business LOCs come with special offerings that could benefit you. Payment flexibility, advanced or user-friendly technology, and transparent advertising are a few examples of perks that you might discover.
What is a Business Line of Credit?
A business line of credit is a flexible form of financing that lets your company borrow multiple times against the same credit line. As you repay all or a portion of the money you borrow (plus interest and fees), you should have access to make future draws from the same lender without submitting a new application for financing.
How Does a Business Line of Credit Work
A business line of credit enables business owners to withdraw funds whenever needed. The borrower can keep withdrawing funds, as long as that borrower keeps current on loan repayments and doesn’t go over the credit limit.
Business credit line use has remained stable over the past year at 32%, even as small business loans decreased after the expiration of the Paycheck Protection Program. However, rates for both credit lines and term loans have continued to increase.
To get a business line of credit, you’ll need to prove your business is legitimate. Expect the lender to ask how long the business has been in existence – six months or more is a good rule of thumb for loan approval. You’ll also need to show your minimum annual revenue flow, which proves you have the ability to repay the line of credit.
A good rule of thumb here is annual revenues equal or higher than your line of credit loan request (i.e., if you’re asking for a LOC of $25,000, you’ll need to show that, at minimum, your business revenues exceed $25,000 annually).
Who Can Use A Business Line of Credit?
Business lines of credit are suitable for established businesses with large recurring expenses. Businesses generally use a business line of credit for everyday operations such as payroll, supplies, general cash flow, seasonal inventory, etc. Some firms also use equipment lines of credit to finance their operation.
According to data from the U.S. Bureau of Labor Statistics, about 20% of new businesses fail during the first two years. Historically, cash flow problems are among the top reason for business closures, regardless of the economic environment
Even if cash flow is sufficient, every business has rough periods. Successful maintenance of any company requires regular cash flow. Many companies apply for a line of credit and only use it when they need it.
To be eligible, you will need to be in business at least six months, with annual revenue of $25,000 or more. Additionally, applicants may need a credit score of 600 or above. Lines of credit usually need to be repaid within 3-12 months and are a form of short-term financing.
APR rates can range from 9%-99% depending on credit history and annual business turnover, among other variables. While the rates can be high, this is offset because businesses only need to use what they require and only pay interest on what they borrow.
How to Get a Business Line of Credit
Below are five general steps you can take to open a business line of credit.
See where you stand. When you apply for a business line of credit, the lender may review details like your credit score (personal and business), time in business, and annual income. It’s critical to know where you stand in each category.
Determine if you’re eligible. Make a list of lenders offering business lines of credit with eligibility criteria you can likely satisfy. If you know you have fair credit and a lender requires good credit, you shouldn’t include the lender on your list of possible funding sources.
Gather your documents. Many lenders will require you to submit documentation along with your financing application. Having your business tax returns, business bank statements, and other financial reports ready could speed up the funding process.
Shop around. Comparing interest rates, fees, and benefits from multiple lenders can help you find a business line of credit that’s best for your situation.
Apply. Once you settle on your preferred business line of credit, it’s time to apply. Be sure to fill out the complete application and send in any documentation the lender requests promptly.
Business Lines of Credit vs. Business Credit Cards vs. Loans: What's the Best Option
About 33% of small businesses applied for some kind of financing last year, according to the 2021 Small Business Credit Survey (SBCS) from the Federal Reserve. This include credit cards, lines of credit, and/or term loans.
Business Line of Credit vs. Business Credit Cards
Business credit cards and business credit lines own the same financial lineage – they both offer business owners access to much-needed working capital. Typically, business lines of credit offer higher credit limits than business credit cards, so if you’re in need of a large amount of capital, a line of credit may be your best option.
A small business line of credit: A line of credit is a revolving loan. Once the line of credit is approved, the business owner can access the funds at any time. The borrower repays the funds used from the line of credit either daily, weekly, or monthly, with interest.
A business credit card: A business credit card also offers business owners access to capital up to a certain credit limit. The main perk of a business credit card is earning card rewards, such as cashback, frequent flier miles, and discounts on common business services. Keep in mind, though, that credit limits are typically lower than with business lines of credit.
Business Line of Credit vs. Small Business Loan
Business lines of credit and small business loans both provide capital to corporate borrowers. But there are a few key differences between these products. Business lines of credit tend to be more flexible but demand higher interest rates. Business loans may offer higher loan amounts but stricter criteria.
A business line of credit: This product is a good choice if you need funds to cover business expenses and expect to be able to pay the loan back fast. Interest rates are typically higher than loans, but you’ll pay only for the amount of credit you use.
A small business loan: Term loans offer set terms and a fixed repayment schedule. You’ll receive the lump sum you’re approved for and begin paying back the debt right away.
Secured vs. Unsecured Line of Credit
One element that a line of credit has in common with a term loan is the possibility to be secured or unsecured. Here are some of the key differences between a secured and unsecured business line of credit.
Unsecured business line of credit: If a lender is comfortable with the risk profile of the borrower, they may approve an unsecured business line of credit, meaning that they don’t demand collateral. This is usually the case with well-established companies that have a good revenue record and are requesting a smaller amount (generally less than $100,000).
Secured business line of credit: when a lender feels there’s a higher level of risk, they may insist upon a secured line of credit. In this situation, they will demand some form of collateral – an asset belonging to the company that the lender can claim if the borrower defaults on the loan.
Online lenders typically offer unsecured lines of credit, which are popular with small businesses that need help with working capital. In a Fed survey, 79% of borrowers said that meeting operating expenses was their reason for applying for unsecured business financing.
A business line of credit can provide a financial cushion when your business experiences a cash flow crunch. If you anticipate slow seasons in your business, you can apply for a business line of credit in advance, long before your business needs to access the funds This preliminary action allows your business to stay afloat during hard times and gives you peace of mind when it comes to the financial security of your business.
Frequently Asked Questions(FAQ)
Can you get a business line of credit with bad credit?
Although it’s harder to get a business line of credit with bad credit, it’s not impossible. Online lenders tend to have more lenient credit requirements than traditional banks, making lines of credit accessible to some borrowers with lower credit scores.
Does opening a business line of credit improve your business credit scores?
Opening a business line of credit and making timely payments can improve your business credit score over time. Just be aware that not making payments will damage your credit score. Only borrow what you can safely pay back.
Are business lines of credit unsecured?
Business lines of credit are typically unsecured, meaning that they do not require collateral. However, some lenders also offer secured lines of credit that use property or equipment as collateral.
Can I get business credit with a new LLC?
Although most business loans and lines of credit will require at least six months to a year of operations from a potential client, you can still access credit with a new LLC. The easiest way to go about getting credit may be to apply for a business credit card. Typically, these lenders will look at your personal credit score instead of your business credit score when determining whether to accept you as a client.
Is a business line of credit better than a loan?
A business line of credit may or may not be better than a loan. It depends on your requirements, business profile, and goals. If you need flexibility and plan to pay down your debt quickly, a line of credit may be preferable. If you need a large sum of money and want set terms, a loan may be the better choice.