What is A BUSINESS
LINE OF CREDIT?
A business line of credit is flexible “revolving” capital that works almost like a credit card, except you get access to cash and, in some cases, lower APRs.
What Do I Need to Qualify?
6+ months in business
$50,000+ in annual revenue
Disclaimer: These are general qualifications. Other information might be considered during your application.
HOW DO I APPLY?
You can get a traditional line of credit through your bank, but if you do not qualify or need access to a line quickly, apply to online lenders like BlueVine or Kabbage below.
Line of Credit at a Glance
Whether you have a home project in the future, are looking to start a new business or have some emergency expense that's come up, it can be difficult and even downright impossible to afford the costs without help. One of the easiest and quickest ways to have money on-demand is through lines of credit. Lines of credit allow you to borrow against a preset amount of money that you were approved to receive from a bank or other type of lender.
maximum loan amount
$10,000 to Over $1 Million
6 Months to 5 Years
7 - 25%
Pros and Cons of a Business Line of Credit
Only pay Interest on funds drawn
Capital is available when needed
Suitable for a wide range of business purposes
Bad credit is acceptable
Excellent way to build your credit
Might need to provide updated documents up each draw
May require collateral
Higher rates for lower credit scores
Best Business Lines of Credit in 2018
There are dozens of amazing lending companies out there that you can choose for lines of credit. Each of these companies has different options and different approval rates, so it pays to take a look at different businesses to see which one is best for you.
• Ondeck - Ondeck is specific to business lines of credit. They have been in business since 2007 and have since grown to be the world's leading business credit line resource. They are currently the leader in online business lending and have helping entrepreneurs realize their dream since their inception. Ondeck allows entrepreneurs to apply for credit on their website and be approved quickly and easily. They offer lines of credit up to $100,000 with APRs as low as 13.99%. Your business must be at least one year old to qualify and the owner applying must have at least 600 points on their own personal credit score.
• Fundation - Located in beautiful Reston, Virginia, Fundation has been a leader in the credit line industry for many years. There are no hidden fees or difficult loan jargon to deal with when utilizing Fundation. Their lines of credit range from $20,000 to $100,000 and they work primarily with personal borrowers and business owners. There is a $500 closing fee as well as a two percent draw fee for each draw that you make on the credit line. No collateral is required to borrow from Fundation.
• StreetShares - StreetShares is a down-to-earth funding company founded in 2013 by two men who believed there was a better way for hard-working people to work with their lines of credit. Today, the company has already worked with hundreds of companies and veterans in need of financial backing. Their use of the Patriot Express credit line is ideal for fast-growing small businesses. You can borrow anywhere from $5,000 to $100,000 with low and affordable APR rates. You only pay a draw fee on the amount that you take out and you can apply with no impact to your credit through their secured site.
• BlueVine - BlueVine offers fast, easy and flexible business funding to entrepreneurs in need of low-cost business lines of credit. The company was founded in 2013 and has since grown to become one of the digital world's fastest growing funding companies. To date, they have worked with over 10,000 small business owners all across the country. BlueVine lines of credit provide money to business owners in need of quick and affordable cash. They provide credit lines as high as $250,000 and with rates as low as 4.8%. You can get approved for a credit line in as little as 20 minutes with relatively no impact to your personal credit score.
• FundBox - With FundBox, there are no signup fees to get started and you can be approved in minutes if you qualify for their credit line. The company works primarily with small business owners and can qualify members for funds up to $100,000. Their no-nonsense platform enables users to see how much their credit line will cost before they sign up for anything. This prevents you from signing up for funding only to find that it is something you cannot afford.
• Kabbage - Kabbage is A+ rated by the BBB for their work with small businesses nationwide. You can apply for lines of credit and be approved in a matter of minutes with minimal impact on your credit score. Kabbage even offers $100 to those who qualify for their lines of credit. You can apply for up to $250,000 in credit and choose from a six to 12 month term length. Approval is given in under 10 minutes, allowing you to have access to your Kabbage funds in a very short period of time. Kabbage has provided over $5 billion in funding to over 130,000 businesses.
Whether you need personal or business credit, lines of credit are often easier and more efficient than installment loans. When using collateral, your credit score has very little impact on whether or not you get approved.
However, keep in mind that the majority of lenders out there do charge a fee each time you draw on your credit, so you'll want to remember this if you continually go back to your credit to take money out regularly.
What is a Line of Credit?
Lines of credit are pre-approved amounts of money that you can draw on when needed. You will often be approved well in advance to needing the money, as you'll find with credit cards, but you do not have to use the money right away.
This means that your approved amount will sit there until it is needed. You can then draw on the amount that you've been approved for and will need to pay it back in monthly installment payments.
Why You Might Need to Take Out a Line of Credit
There are a number of reasons why you might consider lines of credits. For many, they may rely on their credit lines for things like emergency expenses, medical bills, home repairs and renovations and other instances.
It is never a good idea to rely on lines of credit to take vacations, pay for unnecessary items or to cover the basic costs of living.
If you are reliant on your credit line to do any of these things, you need to reevaluate your financial standing and make the necessary changes. If you're an entrepreneur, you may also need credit to start a business or grow what you've already created.
What it takes to qualify
Most credit lines rely on your credit score to be approved. This means that if your credit score is in the poor or fair range, you might not qualify for certain credit lines or your interest rates may be higher.
If, however, you have a good or excellent credit score, your chances of being approved with a reasonable rate is greater.
This simply means that you can easily have the money that you need to borrow against in the future in the event that you need quick and on-demand cash.
If you do not have good credit, your best bet is to go with a secured credit line or to simply deal with higher interest rates.
Secured credit lines make use of some type of collateral, whether it be your home's equity as you'll find with a HELOC or your vehicle, and you will often be approved regardless of your credit score.
For those who are working on building and restoring their credit, a secured option is definitely the better way to go because you can still get approved for credit without worrying that the rate is much too high.
Benefits of Taking Out a Line of Credit
There are many benefits to taking out lines of credit rather than an installment loan. For one, you're approved for a specific amount and can choose at any time when and how you'd like to draw on it.
This is ideal for emergency situations that might come up or if you need extra cash for an expense. The credit line is often approved for a few years, so you have that amount of time to draw on this amount.
Most lines of credit are variable, which means that the interest rate will vary from one month to the next. However, some options are fixed, which means that you'll be locked into a specified rate until you pay off the credit line.
The way that lines of credit work as well is that whatever you pay back into the amount owed goes back into the amount you can draw on.
So every time you pay on your credit line, you're simply putting back into the amount that you've been approved to receive.
The only extra that you're paying is the interest and draw fees, which is where most lenders make their money.
Because of this, the only drawback to lines of credit is that the interest rates can be quite high and are often greater than installment loans.
The Difference Between Installment Loans
and Lines of Credit
There is a huge difference between lines of credit and installment loans. Lines of credit are often pre-approved and pre-set.
This means that you will have a specified amount of money that you can borrow against whenever it is needed. You can also take out a specific amount that is needed, rather than the entire amount that you were approved to receive.
There are often no questions asked when applying for and taking out on a credit line. Most credit lines are approved for several years, which means that you'll have a large amount of money you can borrow against at virtually any time that it is needed.
You are not forced to take out money just because it's available to you.
An installment loan requires that you go through a bank or other financial institute and sign papers to receive a lump sum of money right away.
Lenders often ask those who are applying for a loan what the loan will be used for and will typically make their decision on whether or not the person's use for the loan is truly necessary.
Installment loans are often unsecured, which means that you'll also need to have good or excellent credit in order to be approved.
You will also be required to pay back the entire loan right away because you're given a lump sum of money regardless of whether or not the money is being used.
Business Line of Credit
Unlike a business loan to help your company get started, a business line of credit is ideal for those who want a large sum of money that they can draw on without a specific purpose.
For instance, you might draw on your business line of credit when you want to make changes to your company, renovate your office or building or add different appliances or changes to the interior.
When you get approved for a loan, you receive the entire sum of money at once and will need to begin paying it back right away, whether or not you're using the money.
Because of this, a business credit line is often preferred because you're only borrowing what you need, when you need it.
Business Line of Credit Qualifications
What sorts of businesses are eligible for this flexible financing?
Younger, less established businesses might be able to qualify for short-term lines of credit, while medium-term lines of credit are more for businesses with good credit and a solid financial history.
The maximum amount of funding available, introductory duration of the credit line, and repayment terms depend on your business’s revenues, credit rating, history, and other factors.
Most Customers who qualified had
Time in Business
Over 1 year
What documents will I need to apply?
Voided Business Check
Profit and Loss Statements
Business Tax Returns
Personal Tax Returns
An Example of "Revolving" Business Credit
Business lines of credit can come secured—backed by collateral like inventory, accounts receivable, and so on—or unsecured, backed by your personal guarantee.
This sort of financing often gets referred to as “revolving” credit because you can tap into it again and again… And when you repay what you’ve spent, you can take out even more.
For instance, say you’re given access to a $60,000 small business line of credit.
Next, you decide to take out $40,000, keeping the other $20,000 in the pool of available funds.
Once you pay that $40,000 back (plus interest), you’ll have the whole $60,000 at your fingertips again—without having to apply for another loan.
The time and energy you save is one of the biggest benefits to a business line of credit.
Different Kinds of Business Lines of Credit
Though it’s not an industry standard, we split business lines of credit up into short-term and medium-term.
Although business lines of credit don’t really have term lengths—you can withdraw and pay back those funds indefinitely, as long as your lender believes that you’re a responsible borrower—these labels help you compare short-term loans with short-term lines of credit and traditional term (or “medium-term”) loans with medium-term lines of credit.
The differences are mostly in their minimum qualifications, maximum fund amounts, and interest rates.
Advantages of Business Lines of Credit
The bottom line?
The biggest advantage of a business line of credit is its renewability: you can draw out funds, pay them back, and draw again.
You can use a small business line of credit to help finance ongoing operating expenses, cover cash flow gaps, take advantage of unexpected opportunities, and provide a cushion to protect against emergencies.
Since lines of credit are so flexible, they can also be used for payroll, seasonal expenses, and unforeseen problems or investments, as well as larger purchases.
This flexibility is what makes a business line of credit such a valuable loan product for small business owners.
Business Line of Credit VS Credit Card
Although business lines of credit and credit cards are both forms of “revolving” credit, there are a few important differences you should be aware of:
1. Credit cards usually have higher interest rates.
2. Credit cards charge additional fees for cash advances and, often, balance transfers.
3. Credit cards typically require payments on a monthly basis while business lines of credit usually don’t.
What will a Business Line of Credit
The basic cost of a business line of credit is pretty straightforward: you take, you pay.
Unlike with a traditional term loan, which is one big lump sum with regular repayments, with a business line of credit you’ll only pay interest on the cash you draw.
How a Business Line of Credit can Help with Cash Flow
Let’s say it’s time to pay the bills, but you’re still waiting to receive payment from your own customers—making it a bit tough for you to pay what you owe.
And it’s not the first time this has happened, unfortunately.
You calculate that having a financial cushion of some amount—for our example, let's say $25,000—would help prevent this problem in the future.
So you reach out to an online financial institution and apply to open a small business line of credit of up to $25,000.
Withdrawing Funds and Paying Them Back
Next time you need to pay your bills and you’re still waiting on that cash from your customers, you can draw out funds on the business line of credit to cover your debts.
You needed $5,000 to pay those bills, so you pull $5,000 out of your business line of credit.
And even though you have a $25,000 line of credit, you’ll only need to pay back the $5,000 you borrowed, plus any interest.
Plus, keep in mind that the interest only gets charged on the $5,000 you borrowed, not the full $25,000 you have access to.
If your interest rate is 11%, you’ll have to pay back $5,550 (or $5,000 plus $550 in interest).
Once that’s paid off, you can continue making additional draws up to the $25,000 maximum, only paying interest on what you’re borrowing at any given time.
Home Equity Line of Credit and Other Types
There are two types of credit lines: secured and unsecured. A home equity line of credit, also known as a HELOC, uses the equity on your house as collateral.
The same can be said about other types of secured lines.
You can use a variety of different elements to secure a credit line, such as a savings account, vehicle or some other type of high-value possession you have in your life.
What makes a home equity line of credit so popular is that the amount you can borrow against is often a lot higher than other types, like credit cards. Most HELOCs will use roughly 85% of the value of your home and allow you to borrow against this amount.
Because you're using collateral, you'll also find that your credit score and financial history are often not that big of a factor when being approved.
However, keep in mind that secured credit lines have their drawbacks. If you fail to pay back the amount that you borrowed with interest, you could wind up losing what you used as collateral.