American Express® Business Line of Credit vs. Wells Fargo: Which small business lender is right for you?

American Express and Wells Fargo are two well-known lenders that offer business loans. American Express focuses on a business line of credit for borrowers with fair-to-excellent credit, while Wells Fargo has several loan options for business owners with good-to-excellent credit.

Depending on your needs, either lender may be a good choice. Carefully comparing the key details of each lender’s offerings can help you choose the right business loan lender for your needs.

American Express® Business Line of Credit vs. Wells Fargo at a glance

American Express and Wells Fargo are known for offering the best business lines of credit. While American Express only has one type, Wells Fargo has multiple lines of credit options plus SBA loans, making it the best small business lender to consider if you want flexibility.

American Express® Business Line of Credit

American Express® Business Line of Credit offers just one type of financing – a business line of credit. All businesses are unique and are subject to approval and review.

Loan amounts vary, ranging between $2,000 to $250,000.  This is a much broader range than many lenders. Online lenders often only offer business lines of credit with maximum loan amounts of $100,000.

In some ways, the American Express business line of credit is more accessible than many other business lines of credit. If you can meet the 660 credit score minimum, you may be able to qualify after just one year of operation and with an average monthly revenue of $3,000. These requirements are far lower than lenders that typically require two years in business and an average monthly revenue of $10,000 or higher.

But there are minimum draw amounts that could make this business line of credit less appealing than other business loans:

• For three- and six-month loan terms: If your available loan amount is more than $500, your minimum draw amount is $500. But for loan amounts of less than or equal to $500, the minimum draw amount is $100.
• For 12- and 18-month repayment terms: Your minimum draw amount is $10,000.

Each draw is considered a separate installment loan. Instead of using interest rates, American Express charges monthly fees. These fees are a percentage of your remaining balance and are based on the length of time it takes you to pay off the loan:

• For six-month loans: 3.00% to 9.00%
• For 12-month loans: 6.00% to 18.00%
• For 18-month loans: 9.00% to 27.00%
• For 24-month loans: 12.00% to 18.00%

Pros

• Straightforward application online
• Fair revenue requirement
• No origination or prepayment fee

Cons

• Borrowing costs can be high
• Hard to compare prices to other lines of credit
• Personal guarantee and business assets required

Wells Fargo business loans

Wells Fargo is a major business lender and one of the largest banks in the United States. It offers business bank accounts, including checking and savings accounts, CDs, payroll services and other key business services.

Like American Express, Wells Fargo has a strong focus on lines of credit, offering three different options. Two are unsecured business lines of credit: One is for established companies with two years of operating history, and another is for newer companies and offered through a partnership with the SBA. The third line of credit is for larger companies generating more than $2 million in annual revenue.

Wells Fargo is also an SBA Preferred Lender, offering SBA 7(a) and 504 loans, letting companies borrow as much as $6.5 million for terms as long as 25 years.

Pros

• Offers several lines of credit
• Rewards program
• Low interest rates

Cons

• High credit score requirement
• Annual fees
• Personal guarantee required

How to choose between Amex and Wells Fargo

Wells Fargo and American Express both focus on lines of credit, which can make choosing between the two difficult.

Choose American Express Business Line of Credit if you have fair credit

American Express focuses on newer, less established businesses and has a lower credit score requirement of 660 to qualify. That can make it a better choice if you don’t have sufficient credit or operating history to qualify for a Wells Fargo line of credit.

Choose Wells Fargo if you have good or excellent credit

If you have strong credit and a long operating history, you can qualify for a Wells Fargo small business loan, which may come at a much lower cost than an American Express line of credit. Wells Fargo’s interest rates currently start as low as 8.75 percent APR, depending on the line of credit you choose, and maximum rates are far lower than the maximum fee rates offered by American Express.

Choose American Express for business credit cards

American Express business credit cards are well known for their top-of-the-line features, including the chance to earn rewards on purchases.

Amex business cards have plenty of options, including cash back and travel rewards cards.

For example, the American Express Blue Business Cash™ Card offers a solid flat rate on all eligible purchases up to $50,000 in spending per year, then one percent. It also offers an introductory APR offer on new purchases and additional benefits like shopping and travel protections.

Wells Fargo doesn’t currently accept applications for business credit cards but states it will soon offer new business credit cards.

Choose Wells Fargo for SBA loans

American Express only offers lines of credit. If you want an SBA loan, Wells Fargo is one of the top SBA loan originators in the country, making it a good choice of lender. It primarily offers 7(a) loans, which can cover just about any business need, including working capital. Wells Fargo also offers SBA 504 loans, which are typically used for expansion, real estate and equipment purchases, or other large financing needs.

Alternatives

Wells Fargo and American Express offer lines of credit, but they’re just two of the many business lenders on the market. They might not be the right choice for every situation.

For example, if you’re running a brand new company, you might consider an alternative like Kiva. Kiva offers microloans to startups, letting them borrow as much as $15,000 with no fees or interest.

If you have poor credit, an alternative like Fundible may be appealing thanks to its minimum credit score requirement of just 450.

Another traditional lender for lines of credit for companies that have reasonable credit scores is Bank of America. If you bank with that lender, you can get discounts and other perks for your business loans.

SBA loans

Even though Wells Fargo offers one SBA line of credit as well as SBA 7(a) and 504 loans, you may want to consider different types of SBA loans.

The SBA CAPLine program gives companies a way to access large lines of credit. You can get a line of credit for as much as $5 million and use it for working capital or to help cover seasonal expenses.

When it comes to term loans, the SBA Community Advantage loan is one option. These special SBA 7(a) loans are designed to help businesses in underserved communities. With loan limits as high as $350,000, these loans are great for equipment or land purchases or to use as working capital.

SBA microloans are also an option for startups and smaller businesses, letting them borrow up to $50,000. Microloans usually focus on underserved communities like minority-owned businesses and are commonly used as working capital loans.

Bottom line

Both American Express and Wells Fargo offer business lines of credit but focus on different customers. American Express focuses more on newer companies with lower revenue, while Wells Fargo’s business lines of credit are for established businesses with good-to-excellent credit. Wells Fargo also has the advantage of offering SBA loans, which American Express doesn’t.

Before you apply for a loan from either lender, shop around and compare offers from other lenders. Taking the time to consider all your options can help you find a more affordable loan.

Frequently asked questions

• What happens if you default on an SBA loan?

  If you default on an SBA loan, the lender will seize any collateral you offered to secure the loan. The lender will then notify the SBA to recover any funds protected by the SBA’s loan guarantee. Finally, the SBA will pursue you to recover the money it lost. You’ll have 60 days to respond and repay the loan or file an offer in compromise.

• Can you start a business with fair credit?

  Yes, it is possible to start a business with fair credit. If you need a loan to help fund your company, some lenders will offer loans to businesses with fair or even poor credit. Just keep in mind that bad credit business loans will be more expensive than loans for business owners with good or excellent credit.

• Can I get a loan if I just started a business?

  It is possible, but more difficult, to get a loan if your company is brand new. Some lenders specialize in lending to brand new businesses, but many prefer to lend to companies with some operating history.

*The required FICO score may be higher based on your relationship with American Express, credit history, and other factors.