Disclaimer: Information in the business line of credit articles is provided for general information only, does not constitute financial advice, and does not necessarily describe Biz2Credit commercial financing products. In fact, information in the business line of credit articles often covers financial products that Biz2Credit does not currently offer.

From a piece of equipment breaking down to an opportunity to buy wholesale inventory, there are many reasons why a small business might need fast access to cash. Traditional funding options like small business loans have long underwriting periods and high eligibility requirements that aren’t conducive to agile businesses.

That’s where a business line of credit comes in. There are many business line of credit lenders that offer fast funding (sometimes on the same day you apply) and flexible terms for your business. We break down some of the best here.

In this article:

• Learn what a business line of credit is and how your business can use one.
• Discover the best business line of credit lenders, including unsecured business line of credit lenders.
• Understand the requirements to get a business line of credit and how to apply.

What is a business line of credit?

First off, what is a business line of credit? This business financing option is a mix between a term loan and a business credit card. A small business line of credit lender approves you for a credit limit that you can draw upon to make business purchases. However, unlike a loan, it’s not a lump sum, upfront payment into your business bank account. Rather, you debit the credit line when you need funds, only paying interest on what you use instead of the full amount.

Like a credit card, revolving lines of credit allow you to pay back what you use to regain access to the full loan amount. As such, it’s a flexible funding solution that allows you to increase cash flow or gain working capital when you need it, while avoiding monthly payments and fees when you don’t.

There are many unsecured business line of credit lenders that allow small business owners to get access to funds without putting down business assets as collateral or providing a personal guarantee. That makes lines of credit more appealing to business owners with bad credit and startups that can’t meet the time in business requirements for many loans.

Although business line of credit lenders tend to charge higher interest rates on lines of credit than term loans, entrepreneurs won’t pay that interest unless they really need an influx of cash.

How can you use a business line of credit?

Disclaimer:

A business line of credit is a cash equivalent. When you work with a business line of credit direct lender, you can debit money from the credit line directly to your business bank account. Then, you can use it to pay overhead, cover everyday business expenses, consolidate debt, or spend it on any other business need.

Some of the most common uses include:

• Increase cash flow: Contract- or invoice-based businesses can use lines of credit as a form of working capital while waiting for accounts receivable from customers.
• Emergency expenses: Lines of credit can fund unexpected expenses like equipment maintenance, price increases, or production increases to meet customer demand.
• Business opportunities: Sometimes, you may see an opportunity that’s too good to pass up, like acquiring wholesale inventory or capitalizing on a marketing trend. A line of credit can give you the liquidity you need without the restrictions of a short-term loan.
  
  
• Growth: Rather than taking on monthly payments and paying origination fees to a lender, a line of credit can help pay for investments in technology, equipment, commercial real estate, and more.
• Seasonality: Restaurants, hospitality businesses, and other seasonal businesses that experience a slow offseason can use a line of credit to cover operations costs until the most profitable time of year.

Small business line of credit lenders make it easier for small business owners to access cash when they need it, rather than budget a lump sum over a matter of years.

Top Business Line of Credit Lenders

Wells Fargo

Wells Fargo is one of the country’s biggest banks, so it’s no surprise that it’s also one of the leading unsecured business line of credit lenders. Wells Fargo has some of the stricter eligibility requirements among business line of credit lenders, but its revolving lines of credit have no scheduled annual review, no prepayment penalties, and high funding limits.

You will, however, have to pay an annual fee and inactivity fees, which can feel extra punitive for small businesses.

Eligibility requirements:

• Minimum credit score: 680
• Minimum annual revenue: Undisclosed
• Minimum time in business: 2 years

Turnaround time:

• About a week

Fundbox

Fundbox is an online lender that can render decisions on business lines of credit in as little as three minutes. As such, small businesses can get funding in as little as 24 hours. Add that to a time in business requirement of just six months and annual revenue requirement of just $100,000, and it’s one of the best options for brand new businesses.

It’s also more accessible for businesses with limited credit history and business owners with lower personal credit scores.

Eligibility:

• Minimum credit score: 600
• Time in business: 6 months
• Minimum annual revenue: $100,000

Turnaround time:

• 1 business day

National Funding

National Funding is a business line of credit direct lender that charges factor rates rather than interest rates. This means that a percentage of the credit amount you use will be added to your overall repayment amount, calculated using a factor rate, typically between 1.1 and 1.5.

For instance, if you drew $20,000 with a 1.2 factor rate, you would pay back 20,000 x 1.2, or $24,000.

Factor rates can sometimes make you pay back more than you would with a low interest rate, but if you’re not drawing frequently or in high amounts, it could save your business money. Plus, National Funding offers relatively long 18-month repayment terms and early payoff discounts.

Eligibility:

• Minimum credit score: 660
• Time in business: 6 months
• Minimum annual revenue: $250,000

Turnaround time:

• 1 business day

American Express Business Line of Credit

Another major financial institution, American Express, is a leading business line of credit lender. It offers up to $250,000 of revolving funds and some of the lowest qualifying requirements of any lender. The loan application and approval process takes just a few minutes, and if you have an American Express Business Checking account, you can get your initial funding nearly immediately.

The tradeoff with AmEx is that it requires a personal guarantee, so it is not an unsecured business line of credit lender. Additionally, each credit draw counts as an individual installment loan, with monthly fees charged based on the repayment term. That makes these lines of credit a bit closer to a credit card, which can add some risk.

OnDeck

OnDeck offers same-day funding and repayment terms up to 24 months, making it one of the best funding options for businesses that need fast cash but know they won’t be able to pay it back right away. For instance, a construction company breaking ground on a major project that doesn’t expect to see payment for a few months could benefit from this small business line of credit lender.

Eligibility:

• Minimum credit score: 625
• Time in business: 1 year
• Minimum annual revenue: $100,000

Turnaround time:

• Same day possible

Bank of America

Bank of America is another top unsecured business line of credit lender. It offers lower interest rates than competitors (subject to credit approval), no annual fee, and no draw fees. All of that, however, comes at the cost of some of the highest qualification requirements among business line of credit lenders. Likewise, the underwriting period is longer than most online lenders.

Eligibility requirements:

• Minimum credit score: 700
• Minimum annual revenue: $100,000
• Minimum time in business: 2 years

Turnaround time:

• 1 day to 1 week

Conclusion

A business line of credit can be an excellent funding source for any type of small business. With fast, flexible access to cash, you can use it to navigate financial emergencies, take advantage of business opportunities, and support your business during slow periods. There are many business line of credit lenders out there, making it easier than ever for small business owners to apply online and get cash fast.

FAQs

What is a business line of credit?

Part small business loan, part business credit card, a business line of credit is a funding solution that gives you access to business funding without charging a regular interest rate. Instead of paying interest on the full loan amount, you only pay interest on what you use. Revolving lines of credit allow you to pay back what you use, plus interest, to regain access to the full amount.

How can you use a business line of credit?

A business line of credit is a cash equivalent, which means it can be used like cash. When you debit your credit line, the money goes into your business bank account, and then you can use it to pay for everyday business needs, labor, equipment, and much more.

What are the best business line of credit lenders?

Some of the best business line of credit lenders include Fundbox, OnDeck, American Express, and Wells Fargo. Some other good options that aren’t on this list include Bluevine and Fundible.

Who is a business line of credit right for?

Different business line of credit lenders work better for different applicants. When comparing lenders, consider interest rates, repayment terms, and eligibility requirements. New businesses and business owners with bad credit will likely find better terms from online banking instutitions while more established businesses may fare better with traditional lenders.

Lenders determine the terms of your line of credit based on your personal FICO score and business credit score, annual revenues, and the repayment term of your line of credit. Business owners with bad creditworthiness will typically pay higher interest rates, and vice versa.

How can you get a business line of credit?

The loan application process varies between business line of credit lenders, but it’s usually very straightforward. Most allow you to prequalify and apply online in a matter of minutes.

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