A small business line of credit (LOC) gives your business access to the on-demand funds it needs to grow or cover cash flow gaps and everyday expenses. More flexible than a small business loan and usually less expensive than a credit card, LOCs are a great way to make sure you’re prepared for whatever unexpected short-term costs come your way.
Finder’s business loan experts analyzed dozens of lenders that provide small business lines of credit. We ultimately chose lenders that offer fast funding, competitive rates and terms, a variety of loan amounts and those that consider borrowers with a range of credit scores, annual revenues and time in business.
Some of the criteria we evaluate include:
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Consider these factors when choosing the best business line of credit for your company:
A business LOC is a type of working capital business loan that works a lot like a business credit card with one key difference: You receive the funds as cash. Business LOCs typically have a credit limit between $1,000 and $250,000, which you can withdraw from as needed. Some banks and online lenders even offer business credit lines up to $500K or in the millions.
In some cases, each withdrawal turns into a short-term loan, which you repay plus interest and fees. Or you may only be required to make a minimum monthly payment on the balance — similar to the way you pay off a credit card.
Most business credit lines are revolving, meaning the balance replenishes as you pay off your withdrawal. But, a few lenders offer nonrevolving LOCs, which can’t be reused after you pay it off.
After applying for a credit line, it may take a few weeks to get funding — usually up to two weeks, though unsecured LOCs typically have faster turnaround times. Online lenders tend to provide the quickest funding, some as soon as a day or two after getting approved.
Lines of credit can be highly beneficial to small businesses, but there are some highlights and drawbacks worth noting before you sign up.
We currently don't have that product, but here are others to consider:
How we picked theseThe Finder Score crunches 12+ types of business loans across 35+ lenders. It takes into account the product's interest rate, fees and features, as well as the type of loan eg investor, variable, fixed rate - this gives you a simple score out of 10.
To provide a Score, we compare like-for-like loans. So if you're comparing the best business loans for startups loans, you can see how each business loan stacks up against other business loans with the same borrower type, rate type and repayment type.
Here are other types of business loans to consider.
| Type | Typical loan amounts | Typical term lengths | Best for |
|---|---|---|---|
| SBA Loans | $13,000 to $5 million | Up to 25 years | Established businesses with decent credit that don’t qualify for other types of funding |
| Equipment financing | Up to 100% of the cost of the equipment | 3 to 10 years | Businesses that need heavy equipment or other expensive machinery |
| Term loans | Up to $2 million | 1 to 10 years | Businesses with good credit looking for large loan amounts and predictable monthly payments |
| Microloans | $500 to $50,000 | Up to 6 years | Startup businesses or women- or minority-owned firms |
| Invoice factoring | 70% to 90% of unpaid invoices | 1 to 3 months | Business-to-business (B2B) companies with a lot of outstanding invoices |
| Invoice financing | 70% to 80% of unpaid invoices | 1 to 3 months | B2B companies with a lot of outstanding invoices |
| Merchant cash advances | $5,000 to $200,000 | 3 to 12 months | Retail businesses or others that have a lot of credit card sales |
Many lenders look at your business’s cash flow and your history of paying off business debts. Base requirements for a small business LOC typically are:
Many lenders rely on your personal credit score when you apply. But some might ask to see a business credit report — especially if you’re applying for a larger line of credit from a bank. Even if a lender considers your business credit score, you typically need good personal credit, or a score over 670, to qualify. Getting business loans with fair credit is possible, but your line of credit options are limited with a credit score below 580.
Applying for a small business line of credit may vary by lender, but here are the basic steps to follow.
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What is your primary need for a business loan?
If you don’t think you’ll qualify for a business line of credit or just want to consider all your options, consider the alternatives.
Some lenders may accept credit scores as low as 550 to qualify for a line of credit, but a score of 670 or higher helps you get the most competitive rates.
Lenders typically offer credit lines from $5,000 to $250,000, although some go as high as $500,000 or even into the millions.
Probably not. Lenders that offer business LOCs typically have minimum revenue requirements to qualify, so if you don’t have money coming in yet, you probably won’t be approved. However, you could try applying for a business credit card, a personal loan or a personal line of credit to get your business off the ground.
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