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- Business line of credit rates range from 8 percent all the way up to 60 percent or higher, depending on the lender and the borrower’s creditworthiness
- The best rates are offered to established business owners with good-to-excellent credit
- Business lines of credit may come with additional fees, such as annual fees, origination fees, draw fees and maintenance fees
- Alternatives to business lines of credit include traditional bank loans, business credit cards, peer-to-peer loans, invoice financing, and merchant cash advances
A business line of credit can have an APR that ranges from 8 percent all the way up to 60 percent or higher. And since lenders aren’t required to display their rates, it’s not possible to pinpoint an average business line of credit rate.
What is known is that the best business lines of credit offer the lowest rates to established small business owners with good-to-excellent credit. You’ll have to deal with higher interest rates and fees if you’re a business startup or an owner with poor credit. You’ll also have to shop around more carefully to get the most affordable line of credit.
Here’s a look at some of the current business line of credit rates and some tips to help you find the right line of credit for your business.
Current business line of credit rates
As with any financing, terms and interest rates on business lines of credit may vary between lenders and change based on market conditions. Here are interest rates from some of the most popular lenders.
|Lender||Line of credit rates|
|Fundible||As low as 6.00% (simple interest)|
|SMB Compass||As low as 7.99% APR|
|Bank of America (unsecured)||As low as 9.50% APR|
|Wells Fargo (unsecured)||As low as 10.25% (Prime + 1.75%)|
|Bluevine||As low as 6.20% (simple interest)|
|Lendio||8.00% to 24.00% APR|
|Backd||18.00% to 24.00% (simple interest)|
|Ondeck||52.60% (average APR)|
|American Express® Business Line of Credit||As low as 3.00% to 9.00% APR (monthly fee)|
|Fundbox||As low as 4.66% APR (weekly fee rate)|
|TD Bank||As low as 9.24% APR (Prime + 0.74%)|
Rates accurate as of 9/5/2023
Loan amounts for business lines of credit can vary. While some lenders may offer maximum loan amounts in the millions, your credit score and time in business could make you eligible for loan amounts of $100,000 or less.
What is the interest rate on a business line of credit?
The interest rate on your line of credit represents how much your lender is charging you for the money you receive. Unlike a loan, a business line of credit works like a credit card: It’s revolving and may sometimes have a zero balance. You are only charged interest for any money you currently owe against the line but not for the entire amount of available credit.
For instance, if your business line of credit is for $50,000, but you currently owe $5,000, interest charges only apply to the outstanding $5,000.
One of the reasons it’s wise to compare a few different lines of credit is that the terms you’re offered may vary significantly based on the lender. These factors are also relevant:
- Credit scores. Your business credit score and personal credit score may affect your interest rate. The better your scores, the lower your rate is likely to be.
- Amount of time in business. Lenders may offer a larger line of credit with better terms to more established businesses. Some lenders require you to be in business for at least two years, though some lenders are more lenient.
- Business income. A lender is also likely to consider your business revenue, cash flow, balance sheet and other financial health indicators when they assess the risk associated with lending to you. If you are less of a risk you may be rewarded with a good interest rate.
Some lenders may offer business lines of credit using factor rates. This is expressed as a decimal instead of a percentage. For example, if you take out a loan for $50,000 and the lender charges interest based on a factor rate of 1.2, the loan would cost a total of $10,000 ($50,000 x 1.2 = $60,000), not including any other fees.
Check out our guide on factor rates to learn more, including how to convert them to an annual interest rate. This can make it easy for you to compare lines of credit with different lenders and help you understand your loan’s true cost.
Interest rates vs. weekly or monthly fees
Most lenders show business loan interest rates in the form of an annual percentage rate (APR), which gives you a complete picture of what you’ll owe in a year, including interest and fees. Some lenders will also show simple interest, which only shows interest without fees.
But some lenders charge weekly or monthly fees on outstanding balances instead of interest rates. This also doesn’t give you a complete picture of how much you’ll truly pay.
While these fees look far lower than the APRs you see with most business loans, they could end up costing you more. For example, depending on the total amount you owe, any fees and the time it takes to pay it off, a 2 percent monthly fee could be the equivalent of a 15 percent APR or higher.
Business line of credit fees
The interest rate on your line of credit doesn’t represent the only costs of your line of credit. Here are a few other fees you could find with your business line of credit.
- Annual fee: This is a flat fee, usually under $200, that your business may be charged each year that you keep your line of credit open.
- Origination fee: If your line of credit charges an origination fee, it is usually a percentage of the line’s total value. The fee is charged once when a new line of credit is opened.
- Draw fee: You may also be charged a fee every time you make a withdrawal from the line of credit. This could equal up to two percent of the amount withdrawn.
- Maintenance fee: A maintenance fee is what a lender may charge you to keep the line open. It is often charged for unused accounts and assessed either monthly or annually.
How to get the best interest rates on a business line of credit
Here are some tips to help you get a business line of credit with affordable rates and low fees.
- Shop around. Banks, credit unions and online lenders offer business lines of credit. But to find the best interest rate, you’ll have to compare business lines of credit from at least three lenders, looking for the lowest rates you are eligible for based on your credit history, annual business revenue, years in business and other business factors.
- Build your credit scores. The higher your credit score, the better your interest rates. You can build personal credit by making on-time payments and keeping your level of debt low. Building business credit is a similar process, though you’ll also need to register your business as a corporation or LLC.
- Consider a secured line of credit. While not as appealing as unsecured lines of credit, lenders are more willing to offer favorable terms if you’re able to put up an asset as collateral. This acts as security for the loan and reassures the lender that they will not come away empty-handed if you were to default on the loan.
Alternatives to business lines of credit
A business line of credit is far from the only way to get a much-needed injection of cash into your business. There are traditional bank loans, business credit cards and alternative lending sources. The following represent some of the most common types of business loans and financing.
A loan may be the right choice if you want all of your money at once and don’t need revolving credit. If you’re going through a traditional bank, business loans require a lot of documentation for approval and can be slow to fund.
On the plus side, traditional banks offer higher business loan amounts if you’re qualified, and loans from alternative lenders are accessible to a broader group of small business owners. This includes startups and people looking for bad credit business loans.
Business loans also come with better interest rates and longer repayment terms.
Peer-to-peer (P2P) lending
Peer-to-peer lending is a type of alternative business loan backed by individual lenders, or groups of lenders, instead of a traditional bank. These loans may not have strict credit score requirements when compared to bank financing. But they can also have high interest rates, though you may be able to secure a better interest rate with good credit. This type of lending is usually best for businesses that need fast cash or haven’t had luck getting any other type of bad credit business loan.
Business credit cards
Both lines of credit and credit cards are revolving lines of funding, but each has its advantages and disadvantages. A line of credit can have higher funding, but a credit card won’t require an origination fee or the same maintenance fees as a line of credit. Business credit cards may also come with 0% promotional periods and the chance to earn rewards on purchases. They also have easier repayment terms and can remain open for years, while your line of credit may have a maturity date.
Invoice factoring or invoice financing
Invoice factoring and financing allow you to use your unpaid invoices to gain quick access to financing. With invoice factoring, you sell your outstanding invoices to a factoring company. Invoice financing is a loan, and your invoices act as collateral. This type of financing may work when you’re in a bind, but it’s likely to be more expensive than a line of credit.
Merchant cash advances
Merchant cash advances (MCAs) calculate the amount of financing you receive on past credit and debit card sales. They are a type of business loan for bad credit borrowers and business owners who can’t qualify for fast, short-term funding through a traditional lender. While this is one of the most easily accessible types of loans, it comes with high interest rates and the risk of falling into a cycle of debt or bankruptcy if you can’t pay it off quickly.
A business line of credit is a flexible financing option that can help small business owners gain access to some much-needed cash. You draw funds to cover business expenses and only pay interest on the amount you use.
Keep in mind that the interest rates and repayment terms aren’t as favorable as a traditional business loan. So they generally work best as a short-term solution. If a business line of credit sounds like a good fit for your business, make sure you shop around to get the best rate.
Frequently asked questions
Interest rates on a business line of credit vary. You might find low rates ranging from 10 percent to 15 percent if you have great credit. But interest rates can soar as high as 60 percent or higher, especially if you don’t have good credit, which increases the overall cost of your business line of credit.
Most lenders offering business lines of credit prefer borrowers with at least fair credit. You may be able to get a business line of credit with a bad business or personal credit score. But you should expect higher-than-average interest rates. Customers with bad credit often have better luck with alternative lenders than traditional banks.
Lines of credit typically have a draw period and a repayment period. Once your draw period ends and the repayment period begins, you often have between six months and five years to repay any money you withdrew.
The U.S. Small Business Administration (SBA) offers revolving and non-revolving CAPLines. These business lines of credit include four options with loan amounts of up to $5 million and cover varying working capital needs. Most have repayment terms of up to 10 years, though the Builders CAPLine only goes up to five years plus the estimated time needed to build or rehabilitate the property.