Best business lines of credit in January 2023
What To Know First
Definition of Terms
Compare the best business lines of credit in January 2023
|LENDER||BEST FOR||MIN. FICO CREDIT SCORE||LOAN AMOUNT||MIN. TIME IN BUSINESS|
|Kabbage (secured)||Secured line of credit||640||$2,000-$250,000||12 months|
|BlueVine (unsecured)||Established businesses||625||Up to $250,000||2 years|
|Credibly (secured and unsecured)||Bad credit||600||Up to $300,000||6 months|
|Bank of America (secured and unsecured)||The bank experience||Not disclosed||$25,000-$2 million||2 years|
|Fundbox (unsecured)||Fast funding||600||$1,000-$250,000||6 months|
|Credibility Capital (secured)||Long repayment period||650||$100,000-$250,000 (commitment amount)||4 years|
Kabbage: Best for secured line of credit
Overview: American Express offers lines of credit through Kabbage. This secured line of credit is unusual in that it doesn’t charge interest — which can make comparing it to other lines of credit tricky. Instead, you pay a monthly fee equal to a percentage of your outstanding balance. Those fees can be high, so it’s best to pay down your balance quickly.
Payments on borrowed funds are made monthly.
Why Kabbage is best for secured lines of credit: Kabbage offers a quick online application and reasonable qualification requirements. Its flexible term lengths and monthly (rather than weekly or daily) payment schedule may be appealing to business owners.
- Apply online in just minutes
- Flexible access to funds
- Multiple term options
- High fees on longer terms
- Personal guarantee required
- Minimum draw amounts
Kabbage requires a personal guarantee. It also has minimum draw amounts of $500, $10,000 and $20,000 for terms of 6, 12 and 18 months respectively. Your business must have been operating for at least 12 months and making at least $3,000 in monthly revenue.
Bluevine: Best for established businesses
Overview: BlueVine is an online business bank that offers business checking and loans. Its starting interest rate is relatively low. Applications are processed in as little as five minutes, and businesses can start drawing on funds within one to three days.
Payments on borrowed funds are made weekly.
Why BlueVine is best for established businesses: If your business is well-established and has good cash flow but weak credit, you may find BlueVine appealing. BlueVine’s minimum credit score is only 625.
- Low minimum credit score
- High loan maximums
- Can bank and manage your loan with the same company
- Requires $40,000 in monthly revenue
- Limited term length options
BlueVine loans aren’t available in Nevada, North Dakota or South Dakota. Your business must be at least two years old and must make at least $40,000 in monthly revenue. Fees include a bank wire transfer fee of $15.
Credibly: Best for bad credit
Overview: Credibly is an online small business lender offering a variety of loan products. It offers both secured and unsecured business line of credit with lenient eligibility requirements, meaning many business owners will be able to qualify. It also has a low APR for well-qualified companies. Potential borrowers can prequalify in minutes, be approved as soon as the same day and start receiving fund within 24 hours.
Why Credibly is the best for bad credit: With a low credit score requirement of 600, Credibly makes it easy for small business owners to access a line of credit. Plus, Credibly has flexible qualification requirements that weigh factors beyond credit score.
- Low credit score requirements
- High maximum loan amount
- Secured and unsecured options
- May require an origination fee
- Minimum annual revenue of $180,000 is on the higher side
- Interest rates not disclosed
Bank of America: Best for the bank experience
- No loan maximum on the secured line
- Renewable loan terms
- Multiple line of credit options for differing needs
- Stringent eligibility requirements
- Minimum credit score not disclosed
- High minimum borrowing amount
Bank of America’s loan products are available in all states and Washington, D.C.
Business Advantage Credit Line (unsecured): To be eligible, businesses must have been in operation for at least two years under the current ownership and must make at least $100,000 in annual revenue. Applicants must have a minimum combined ownership of 60%, with anyone owning 33% or more of the company on the application and offering a personal guarantee.
Fees include a $150 annual fee (waived for the first year), along with stop payment, expedited delivery, international transaction and late payment fees.
Secured business line of credit: To be eligible, businesses must have been in operation for at least two years under the current ownership and must make at least $250,000 in annual revenue. Applicants must have a minimum combined ownership of 80%, with anyone owning 25% or more of the company on the application and offering a personal guarantee.
Fees include upfront and renewal fees, which vary based on the line of credit’s size.
Fundbox: Best for fast funding
Overview: Fundbox is an online business lender that focuses on speed. It boasts approval times as short as three minutes and funding as soon as the next business day.
Fundbox does not charge interest on its unsecured lines of credit, instead charging fees on the amount you borrow. It has moderate revenue requirements, but does not let you borrow money for long, with loan terms of only 12 or 24 weeks. You need to be able to handle large weekly payments until you repay the loan.
Why Fundbox is best for fast funding: Get a decision in minutes and funds in your account as soon the next day.
- Next-day funding
- Low minimum credit score
- Short repayment terms
- Weekly fees make it hard to compare rates
Fundbox is available in all 50 states and multiple territories. Its loans require a personal guarantee from business owners with at least a 25 percent stake. Businesses must have been in business for, "ideally," at least 6 months and must have a credit score fo at least 600 and annual revenue of at least $100,000. In addition to the weekly fees, Fundbox charges a $6 non-sufficient funds fee.
Credibility Capital: Best for long repayment periods
Overview: Credibility Capital targets established companies for its secured lines of credit, with the longest time-in-business and highest revenue requirements of lenders on this list. Well-established companies who work with Credibility Capital are rewarded with long repayment terms, giving them significant flexibility with managing their debt.
Approved applicants can begin receiving funds within three to five days.
Why Credibility Capital is best for long repayment periods: It has the longest repayment period on this list at five years — a two-year draw period, during which only interest payments are required, plus a three-year amortization period. Note that draws are limited to four per month.
- Repayment period of five years
- High loan maximum
- Monthly payments
- Strict time-in-business and revenue requirements
- High minimum commitment amount of $100,000
- Max 4 draws per month
Credibility Capital’s lines of credit are not available in Nevada, North Dakota, South Dakota or Vermont. The business owner must be a U.S. citizen. Companies need at least four years in business, $400,000 in annual revenue and a FICO above 650 for the business owner. Additionally, the business and owner cannot have any bankruptcies in the past five years, current thirty-plus day delinquencies or collections, charge-offs or 90-plus day delinquencies in the past two years.The lender requires a blanket UCC lien and a personal guarantee from anyone who owns at least 25 percent of the company. Credibility Capital charges a $300 annual maintenance fee during the draw period and a 4.99 percent commitment fee, the latter of which can be funded with the borrower’s initial draw.
The Bankrate guide to choosing the best business line of credit
If you own a business, you’re familiar with the cash flow challenges that a company can face. Even if you’re doing well and making sales, waiting for payments can leave you cash-poor when it comes time to pay the bills.
A business line of credit is a flexible financial tool that lets you deal with unexpected expenses and bridge the gap when waiting for customer payments. You can get them from traditional and online lenders.
We compared many lines of credit based on their availability, interest rates, fees and other features to help you find the best for you. Before you apply, make sure you understand how business lines of credit work, how they differ from typical loans and whether they’re the right fit for you.
What is a business line of credit?
A business line of credit is a flexible loan for businesses that works like a credit card. Companies draw money from their credit lines as needed, only paying interest on the portion of money borrowed. As they repay the amount borrowed, they replenish the funds available. These funds can typically be accessed using a business checking account or mobile app.
How does a business line of credit work?
Business lines of credit are similar to business credit cards, both allowing small businesses to access funds when needs arise instead of the lump sum a business loan would provide.
Interest rates on business lines of credit are typically lower than those of a business credit card. Lenders set credit limits and interest rates based on factors like how long the current owner has been in place and what the company’s annual revenue is. A line of credit typically requires renewal annually.
Secured vs. unsecured business lines of credit
There are two main types of business lines of credit: secured and unsecured.
Secured lines of credit are typically easier to qualify for and have lower interest rates. However, they require collateral that the lender can repossess if you are unable to make your required payments. Often this will be physical property, such as a piece of real estate your business owns or valuable equipment.
Unsecured lines of credit don’t require collateral. That means you can qualify even if you don’t have anything to put up to secure the loan. However, they tend to have stricter eligibility and credit requirements and charge higher interest rates or fees.
Business line of credit vs. business credit card
Business lines of credit and business credit cards both let companies draw funds from a pool of credit on an as-needed basis. However, they fit very different roles.
Lines of credit usually have much higher loan amounts and typically have lower interest rates. They’re most useful for when a company needs cash to pay its bills or for other purposes. They’re also a better choice if you need to carry a balance for a longer period.
Credit cards usually have lower credit limits and higher rates, meaning you want to use them for smaller purchases and pay them off quickly. They’re best used when your company needs to do things like pay for travel or make purchases from retailers.
One perk of business credit cards is that you may be able to earn cash back or other rewards when you use one.
Business line of credit vs. business loan
A business line of credit is a type of revolving credit; a business can withdraw funds whenever the need arises, as long as the credit limit isn’t exceeded. Interest then accumulates on the funds that are drawn, usually at a variable rate. Repayments are made daily, weekly or monthly. For these reasons, a business line of credit can be useful for small business owners looking to cover short-term needs.
In contrast, a small business term loan is a lump sum of money given with a fixed interest rate and paid back through fixed monthly payments. Loan payments start immediately, whether a business uses the money right away or not. Borrowing limits are often lower on a line of credit than on a business loan, typically ranging from $10,000 to $100,000. However, some lenders offer secured lines of credit, which offer higher limits of up to $2 million. Secured lines of credit require that you provide collateral.
Additionally, business loans are typically limited to predetermined uses, like purchasing new equipment, while lines of credit are more flexible, allowing you to use the money for whatever business expense you choose.
Requirements to get a business line of credit
Typically, lenders require that you be in business for a minimum of six months before applying for a business line of credit. Lenders also want to see that you will be able to repay your loan, so they’ll usually require a minimum annual revenue of $30,000 to well over $100,000, depending on the lender.
The credit score requirements for a business line of credit vary based on your lender, but generally, it’s recommended that you have good credit before applying.
Is a business line of credit right for me?
Your specific business needs will determine if a business line of credit is right for you. A line of credit is a good fit for businesses that:
- Are looking for extra cash flow.
- Don’t have a specific purpose in mind.
- Experience seasonal fluctuations.
- Have increased short-term expenses, like replacing inventory or paying for unexpected costs.
- Have customers who take longer than 30 days to pay.
- Want easy access to extra funds.
Business lines of credit offer flexibility and usually have fewer requirements than business loans.
However, keep in mind that lines of credit often come with variable interest rates, meaning that the rate you’re given initially may rise over the course of your repayment.
There are also usually fees that can quickly add up, costing you more than you may have initially expected. These lines of credit can also be much harder to qualify for. Lenders often restrict the amount that you can borrow, generally allowing smaller amounts than the typical business loan.
FAQs about business lines of credit
The interest rates on business lines of credit can fluctuate significantly depending on market conditions and the lender you choose. The typical interest rate for a business line of credit can begin as low as 5 percent but also run more than 20 percent. This variability only reinforces the need to shop and compare lenders for the lowest interest rate on your business line of credit.
Business lines of credit may come switch some fees, such as:
- Origination fees: A fee charged when you first apply and receive the line of credit
- Maintenance fees: An ongoing monthly or annual fee
- Inactivity fees: A fee charged if you don’t draw from the line of credit often enough
- Draw fees: A fee charged each time to take money from the line of credit.
- Renewal fee: A fee that applies when you renew your line of credit for another draw period.
Once your business credit line is approved, you can start drawing from your credit line, withdrawing as much as you want up to your limit. Every month, you’ll have to make a minimum monthly payment on your business line of credit.
Once you repay the amount you’ve drawn from your credit line plus any interest you’ve accrued, those funds will once again be available for you to use.
While your line of credit offers flexible spending, get in the habit of using it only when needed. Limit usage to short-term expenses, paying used funds in full as quickly as possible.
Paying off your line of credit quickly promotes responsible use, builds up your business’s credit and could lead to better financing options later. It also decreases the amount of interest you’ll pay on the funds you borrow.
To choose the best business lines of credit, we ensured all loans featured are broadly available across the United States. We then considered features that make loans affordable and accessible to businesses with different characteristics and needs, including interest rates, whether the loans are secured or unsecured, minimum annual revenue and fees. Additionally, these lenders were evaluated for notable qualities such as funding speed and nontraditional eligibility criteria.