Best lines of credit to cover business expenses in November 2023
“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.
BLUEPRINT
Updated 2:45 p.m. UTC Nov. 1, 2023
Editorial Note: Blueprint may earn a commission from affiliate partner links featured here on our site. This commission does not influence our editors' opinions or evaluations. Please view our full advertiser disclosure policy.
Unlike a business installment loan that provides a lump sum, a business line of credit gives you access to a revolving credit line that you can borrow against on an as-needed basis. The best business lines of credit offer competitive interest rates, a wide range of credit line amounts, reasonably long repayment terms and quick funding times. Some also have shorter requirements for how much time your business must be in operation.
To determine the best business lines of credit, we compared 12 prominent lenders using these metrics as well as other factors like fees, online accessibility and customer experience to pick the best lenders for a wide array of business owners.
-
American Express® Business Line of Credit
: Best for low revenue
-
OnDeck
: Best for fast funding
-
Fundbox
: Best for startups
-
Bluevine
: Best for no monthly fees
Why trust our business loan experts
Our team of experts evaluated hundreds of business loan products and analyzed thousands of data points to help you find the best fit for your situation. We use a data-driven methodology to determine each rating. Advertisers do not influence our editorial content. You can read more about our methodology below.
- 12 personal loan lenders reviewed.
- 156 data points analyzed.
- 6-stage fact-checking process.
Best business lines of credit
American Express® Business Line of Credit
OnDeck
Fundbox
Bluevine
Compare the best business lines of credit
Methodology
Our expert writers and editors have reviewed and researched 12 popular lenders to help you find the best business line of credit. Out of all the lenders considered, the four that made our list excelled in areas across the following categories (with weightings): loan details (25%), loan cost (35%), eligibility and accessibility (10%), customer service (20%) and application process (10%).
Within each major category, we considered several characteristics, including APR ranges, loan amounts, maximum loan terms and fees as well as minimum credit score and time in operation requirements. We also evaluated each provider’s customer support options and customer reviews.
Why some lenders didn’t make the cut
Of the 12 business loan lenders that we reviewed, less than half made the cut. The reasons for this varied by lender, with several not receiving high enough scores due to a lack of transparency around interest rates, fees and eligibility requirements like minimum credit score and time in operation. Some also scored lower for not disclosing their funding times or receiving poor customer reviews.
What is a business line of credit?
A business line of credit is a type of financing available through private online lenders, banks and credit unions. The Small Business Administration (SBA) also backs a line of credit product through its CAPLines program. Unlike a business term loan that’s provided as a one-time lump sum, a business line of credit gives you access to a revolving credit line that can be repeatedly drawn on and paid off on an as-needed basis.
Like other kinds of business financing, business lines of credit can be unsecured with no collateral requirements. They can also be secured, which means you’ll need to pledge an item of value as collateral. Because collateral makes a loan less risky for the lender, you might have an easier time qualifying for a secured line of credit compared to an unsecured one.
How a business line of credit works
A business line of credit lets you borrow against your credit line and pay it off on an as-needed basis — similar to a credit card. However, lines of credit typically provide higher credit limits compared to business credit cards, often up to $100,000 or more with repayment terms ranging anywhere from several weeks up to a few years. This capital can be used for many business needs, including expenses that can’t be covered by a credit card like payroll, inventory and vendor bills.
You’ll also only pay interest on what you actually use from the credit line rather than on the entire available amount. Note that interest rates on business lines of credit tend to be lower than rates on credit cards but higher than those on business term loans — though the rate you’re offered will depend on the lender as well as your personal and business financial profile.
Additionally, many business lines of credit come with variable rates, meaning your rate and payment can fluctuate over time according to market conditions. Also keep in mind that lenders often charge fees that can increase your overall borrowing costs, such as origination fees, annual fees, monthly maintenance fees and draw fees.
Business line of credit requirements
The exact requirements for a business line of credit will vary by lender, but here are a few common eligibility criteria to keep in mind:
Personal and business credit history
Lenders will consider both your personal and business credit scores when determining your creditworthiness as well as your interest rate. You’ll typically need a good personal credit score (usually meaning a score of 670 or higher) or excellent business credit to qualify.
There are also some lenders that accept lower credit scores — such as Fundbox, which has a 600 credit score minimum. Just keep in mind that bad credit loans often come with higher interest rates and fees compared to good credit loans.
Minimum time in business
Your business will need to be operating for a minimum amount of time to be eligible for a business line of credit. This can vary by lender, with some accepting a minimum of six months while others require at least two years or more.
Minimum annual revenue
Lenders also want to see that your business is successfully generating revenue and that you can reasonably afford repayment. Minimum annual revenue requirements often start at $100,000. However, you might find some lenders that accept lower amounts of revenue. For example, American Express has an average monthly revenue requirement of at least $3,000 for its business line of credit.
Collateral
A business line of credit might be secured, which means you’ll have to provide collateral, such as real estate or inventory. Because this lowers the risk for the lender, you might be able to take advantage of better loan terms. However, it also means you could lose your property if you fail to make your payments.
In many cases, business lines of credit are secured by your business assets as well as a personal guarantee, which is an agreement that you’ll be personally responsible for repaying the loan if your business defaults.
How to apply for a business line of credit
If you’re ready to apply for a business line of credit, follow these steps:
1. Review your credit
When you apply for a business line of credit, the lender will review your personal and business credit to see if you qualify and determine your interest rate. So be sure to check your credit beforehand to see where you stand.
You can visit a site like AnnualCreditReport.com to review your credit reports from each of the credit bureaus — Experian, Equifax and TransUnion — for free. You can also likely check your credit score for free through Experian, a credit-monitoring service or possibly your current bank or credit card company.
Several third-party companies provide access to your business credit report, too. These include Dun & Bradstreet as well as Experian and Equifax. If you find any errors in your personal or business credit reports, report them to the appropriate credit bureaus to possibly boost your credit score.
2. Research lenders and narrow down your loan option
It’s important to shop around and compare your options from as many lenders as possible before applying for a business line of credit. This can help you find the right option for your needs. Consider interest rates as well as credit line amounts, repayment terms, fees and eligibility requirements. Several lenders also let you prequalify with only a soft credit check that won’t hurt your credit score, which can help to further narrow down your choices.
After you’ve compared lenders, pick the line of credit option that works best for you.
3. Gather documentation and complete the application
Your lender will require documentation covering both your personal and business information when you apply. Required paperwork likely includes business licenses, tax returns and financial statements. You’ll also need to provide information regarding collateral if your loan is secured.
After you’ve gathered your documentation, you’ll need to submit a full application. Many lenders provide an online application process while others require you to discuss your options with a loan specialist.
Note that the time for an approval decision will vary by lender, with online lenders sometimes providing a decision within a day while traditional banks or credit unions might take a few weeks.
4. Get your funds
If you’re approved, the lender will have you sign so you can have access to your funds. Afterward, you can begin making draws on your credit line. Depending on the lender, you could get these funds as soon as the same or next day after approval.
Alternatives to business lines of credit
While business lines of credit can be a good choice in some cases, they aren’t right for every business. Here are some alternatives to consider:
Business term loan
If you know exactly how much you need to borrow, you might prefer to apply for a business term loan, which will provide you with a lump sum to use how you wish. Interest rates also tend to be lower on term loans compared to lines of credit.
SBA loan
The SBA partners with lenders across the U.S. to offer loans for small businesses. These loans often provide higher loan amounts compared to typical private loans. Because they’re less risky for lenders, they can also be easier to qualify for.
There are also several types of SBA loans available depending on your needs. However, keep in mind that these loans often require collateral and a down payment.
Business credit card
If you’d still prefer access to a revolving credit line, a business credit card could be a good fit. Note that several types of business expenses can’t be charged, though, such as payroll. Credit cards also generally have higher interest rates than lines of credit. However, a business credit card can be a helpful option for covering smaller, routine costs like travel, supplies or small pieces of equipment.
Invoice factoring
If your business is paid by invoices, you can use this option to borrow against outstanding invoices. You’ll give responsibility for collecting payments to a third-party factoring company in return for a fee. You’ll then get 70% to 90% of the invoice amount from the company to use how you’d like — often within just a few days, which is faster than the 30 to 90 days that it typically takes to get paid by invoice.
However, you’ll also lose some of your revenue to interest and fees, which can make this a more expensive alternative compared to a line of credit or other traditional financing options.
How much you’ll be able to borrow with a business line of credit will depend on the lender as well as your individual and business financial profile. The highest amount available with a business line of credit is typically $500,000.
Yes, you might be able to get a business line of credit with bad credit, though you’ll likely have a harder time getting approved. For example, Fundbox’s minimum credit score is only 600, and both OnDeck and Bluevine accept credit scores as low as 625.
While several lenders have a minimum time-in-operation requirement of at least one year, others accept shorter times. For example, you could get approved for a Fundbox business line of credit with only six months in operation, which could be appealing for new businesses.
In addition to time in business, you’ll also need to meet an annual revenue requirement. In many cases, your revenue must be at least $100,000 per year, though some lenders — such as American Express — accept smaller revenue amounts.
“Credit lines are often based on receivables and inventory,” says Carolyn Katz, funding leader and advisor at SCORE New York City. “It may be possible for a pre-revenue company with significant receivables from strong counterparties to get a credit line, but generally, it’s challenging.”
Lenders generally have revenue requirements for businesses seeking lines of credit, so it will likely be difficult to qualify if your business has no current revenue. That said, certain lenders might be willing to focus on your personal credit and business experience instead of traditional requirements like revenue.
If you have a new business and are struggling to qualify for a business line of credit, you might consider a business credit card instead. Many lenders use your personal guarantee to secure small business credit cards and so might be willing to approve you based on your personal credit profile even if you have limited business credit and income.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.
