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Get a business line of credit to fund ongoing expenses

Get quick access to cash for your business and pay it back at your own pace.

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Editor's choice: Fundbox business loans

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  • May receive funds in 1 business day
  • Receive 100% of invoice’s value
  • Bad credit OK
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A business line of credit offers several advantages over other types of credit — especially since you can borrow as much as you need whenever you need it. But you may risk over-borrowing and could accrue multiple fees if you only make minimum payments.

How does a business line of credit work?

A business line of credit allows you to borrow funds up to a predefined credit limit, and only pay interest back on the money you borrow. This flexibility means you can draw and repay your loan at your business’s base, similar to a credit card.

Most lenders allow you to make multiple draws — although there may be a fee for each one — and interest rates tend to be much lower than similar cards. This allows you to access the amount your business needs without forcing you to pay interest on the money you don’t use. And since many lines of credit are revolving, you’ll have access to your full line of credit as you repay.

This added flexibility is what makes a business line of credit valuable and practical for business owners. You can use your loan funds for just about any business expense, like buying inventory or covering an unexpected expense, and most lines are available from $1,000 to $250,000. The interest and fees you pay will depend on your lender, so compare your options before committing to a lender.

Discounted credit lines for businesses affected by the coronavirus

Some lenders are offering lines of credit at discounted rates to businesses with lost revenue due to the coronavirus outbreak.

For example, U.S. Bank is offering its Cashflow Manager line of credit at rates 1% lower than what your business would qualify for. Businesses can apply for credit limits from $10,000 to $250,000 with or without collateral using this program. Standard eligibility requirements still apply.

More options for businesses hurt by COVID-19

Compare business line of credit offers

Data indicated here is updated regularly
Name Product Filter Values Loan amount APR Requirements
Lendio business loans
$500 – $5,000,000
Starting at 6%
Operate business in US or Canada, have a business bank account, 560+ personal credit score
Submit one simple application to potentially get offers from a network of over 300 legit business lenders.
ROK Financial business loans
$10,000 – $5,000,000
Starting at 6%
Eligibility criteria 3+ months in business, $15,000+ in monthly gross sales or $180,000+ in annual sales
A connection service for all types of businesses — even startups.
Fundera business loans
$2,500 – $5,000,000
7% to 30%
$300,000+ of annual revenue, 680+ personal credit score, in business for 3+ years
Get connected with short-term funding, SBA loans, lines of credit and more.
Fundbox business loans
$1,000 – $100,000
4.99
You must have an established business.
Get flat rate, short-term financing based on the financial health of your business, not your credit score.
Become business loans
$5,000 – $500,000
Starting from 7.5%
At least 3 months in business with $10,000 in monthly revenue or at least 6 months in business with $3,000 in monthly revenue.
Compare loan offers from top lenders using this marketplace. It’s free & won’t affect your credit.
Seek Business Capital loans
$5,000 – $500,000
Varies by lender
Personal credit of 680+, no bankruptcies in the last 4 years.
Startups and newer businesses could qualify for loans and credit cards with a custom financing package.
Finance Factory business loans
$25,000 – $250,000
7.99% to 24.99%
Good to excellent personal credit, steady cash flow, two years in business
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Compare up to 4 providers

5 questions to ask when considering a business line of credit

Before your business takes on a line of credit, ask yourself these questions:

  1. Can my business afford it? This should always be the main factor in your decision. Before taking on any type of debt, calculate all associated costs and make sure your business’s cash flow is able to handle repayment.
  2. How much can I borrow? Different lenders offer varying minimum and maximum amounts. However, the particular amount you’re approved for depends on several factors, including past credit history, requested credit limit, cash flow, assets and liabilities.
  3. When will I receive my line of credit? Make sure the lender you choose can provide your funds when you need them. Otherwise, you’ll be wasting time, money and resources.
  4. How much will it cost? Besides the interest rate, check to see what fees you’ll be charged, including one-off fees such as application and establishment fees. The lender may also include ongoing fees such as loan service fees and annual fees.
  5. How much will my repayments be? Your monthly repayments aren’t fixed and will depend on how much your business can pay down. As long as you pay interest and other fees for the month, lenders provide great flexibility on how much of the balance you want to pay back.

Top features to keep in mind when comparing lenders

After you’ve asked a few questions to make sure your business can afford a line of credit, you should compare lenders to make sure you’re getting the best deal possible.

  • Interest rates. Make sure you understand whether your lender charges a variable or fixed interest rate. Keep in mind you’ll only be charged interest on the amount you actually borrow, not on the amount you’re initially approved for.
  • Fees. Usually, a business line of credit includes one-off fees such as application and establishment fees. They also may include other fees such as annual charges, ATM and transaction fees.
  • Monthly repayments. Business lines of credit can be paid in partial monthly repayments. If you can afford to pay off your balance in full, you’ll avoid unnecessary interest charges.
  • Secured vs. unsecured. Some business lines of credit may need to be secured, meaning you may be required to put up an asset as collateral.

What are the drawbacks?

While a business line of credit can be flexible and convenient, you should still be cautious before committing your revenue to debt.

  • Requesting more than you need. Think twice before requesting a credit limit more than what your business actually needs. By doing this, you may find yourself taking on too much debt that could put your business in financial distress.
  • Borrowing more than you can afford. It’s easy to borrow more than your business can afford, especially if you borrow the maximum amount allowed by your credit limit. Only borrow the amount you need, and if you can, pay more than the minimum each month to reduce the amount you owe.
  • Taking too long to repay. Because business lines of credit are like credit cards, interest and charges will continue to accrue when a balance is left unpaid. This means the longer you wait to pay back your unpaid balance, the more expensive it gets.

How do I apply for a business line of credit?

To get started, follow these steps. But keep in mind that each lender is different, so you may have to provide more or less information when you fill out a specific application.

  1. Compare lenders using the table above.
  2. Check the lender’s eligibility criteria to make sure your business qualifies.
  3. Gather documents like your profit and loss statements, your tax numbers and accounting records.
  4. Fill out the lender’s application. This usually will include both personal and business information.
  5. Submit your application and wait for a response. Depending on the lender, it may take a few minutes to a few days.

Most business line of credit lenders require you to have been in business for at least a year and meet certain revenue criteria. If you have a newly established business, check out our guide on startup loans.

Bottom line

While a business line of credit can be convenient in its flexibility, it can be tempting to make a large draw that adds more debt than your business can afford. Carefully compare lenders, and be sure to consider all your business loan options before making a final decision.

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