A business line of credit can be a lifeline for small businesses, providing flexible access to funds when you need them most. But with so many options available, where should you turn to get a business line of credit? This comprehensive guide will explore the best places to obtain business lines of credit, compare top lenders, and help you determine the right option for your company’s needs.
Traditional Banks and Credit Unions
Many small business owners start their search for financing with traditional banks and credit unions. These established financial institutions often offer competitive rates and terms for business lines of credit, especially for well-qualified borrowers.
Advantages of Traditional Lenders
- Lower interest rates (often starting around 8-10%)
- Higher credit limits (up to $1 million or more for established businesses)
- Build a long-term banking relationship
- In-person support at local branches
Drawbacks of Traditional Lenders
- Strict eligibility requirements (credit score, time in business, revenue)
- Lengthy application and approval process
- May require collateral for larger credit lines
Top Traditional Lenders for Business Lines of Credit
Bank of America
Bank of America offers secured and unsecured business lines of credit with competitive rates starting as low as 8.25%. They provide flexible options for businesses at different stages:
- Secured Business Advantage Credit Line: $25,000 to $1 million+
- Unsecured Business Advantage Credit Line: $10,000 to $100,000
- Cash-secured line of credit: Starting at just $1,000
Bank of America stands out for its low starting rates and options for newer businesses. The cash-secured line only requires 6 months in business and $50,000 in annual revenue to qualify.
Wells Fargo
Wells Fargo provides multiple business line of credit options:
- BusinessLine line of credit: $10,000 to $150,000
- Prime Line of Credit: Up to $1 million
- Small Business Advantage line of credit: $5,000 to $50,000 (for businesses less than 2 years old)
Wells Fargo offers competitive rates starting around 10% APR for well-qualified borrowers. Their Small Business Advantage line is an excellent option for startups needing access to capital.
Chase
Chase Bank provides secured and unsecured business lines of credit for established companies:
- Secured line of credit: $10,000 to $500,000
- Unsecured line of credit: $10,000 to $500,000
Chase typically requires at least 2 years in business and strong financials to qualify. Their rates are competitive, but specific details aren’t publicly available.
Online Lenders and Fintech Companies
In recent years, online lenders have disrupted the small business financing landscape. These tech-savvy companies offer streamlined applications, fast approvals, and more flexible eligibility requirements than traditional banks.
Advantages of Online Lenders
- Quick application and funding (often within 1-3 business days)
- More lenient eligibility criteria
- Innovative underwriting considers factors beyond credit scores
- Entirely online process
Drawbacks of Online Lenders
- Generally higher interest rates than traditional banks
- Shorter repayment terms (often 6-24 months)
- May require more frequent payments (weekly or daily)
Top Online Lenders for Business Lines of Credit
Bluevine
Bluevine specializes in flexible financing for small businesses, including lines of credit up to $250,000. Key features include:
- 6 or 12-month repayment terms
- Rates starting at 6.2% for well-qualified borrowers
- Minimum requirements: 625 credit score, $10,000 monthly revenue, 24 months in business
Bluevine stands out for its competitive rates and fast funding, often providing access to capital within 24 hours of approval.
Fundbox
Fundbox offers lines of credit up to $150,000 with a focus on accessibility for newer businesses and those with less-than-perfect credit. Notable features:
- 12 or 24-week repayment terms
- Rates starting at 4.66% for 12-week terms
- Minimum requirements: 600 credit score, $100,000 annual revenue, 6 months in business
Fundbox’s low credit score and time-in-business requirements make it an attractive option for startups and businesses rebuilding their credit.
OnDeck
OnDeck provides lines of credit up to $100,000 with flexible terms:
- 12, 18, or 24-month repayment options
- Rates starting at 29.9% APR
- Minimum requirements: 625 credit score, $100,000 annual revenue, 12 months in business
While OnDeck’s rates tend to be higher than some competitors, they offer same-day funding and report to business credit bureaus, helping you build your business credit profile.
Kabbage (American Express Business Blueprint)
Kabbage, now part of American Express, offers lines of credit up to $250,000 with unique fee structures:
- 6, 12, or 18-month terms
- Monthly fee structure instead of traditional interest (3% to 27% of borrowed amount)
- Minimum requirements: 660 credit score, $3,000 monthly revenue, 12 months in business
Kabbage’s fee structure can be beneficial for businesses that repay quickly, as there are no prepayment penalties.
SBA-Backed Lines of Credit
The U.S. Small Business Administration (SBA) partners with approved lenders to offer government-backed financing options, including lines of credit. While not directly provided by the SBA, these loans come with favorable terms due to the government guarantee.
SBA CAPLines Program
The SBA CAPLines program offers four types of lines of credit:
- Seasonal CAPLine: For seasonal increases in accounts receivable and inventory
- Contract CAPLine: For costs associated with specific contracts
- Builders CAPLine: For small general contractors or builders to finance direct costs for construction and renovation
- Working Capital CAPLine: For short-term working capital needs
Key features of SBA CAPLines
- Credit lines up to $5 million
- Maximum repayment terms of 10 years
- Interest rates: Prime + 2.25% to Prime + 4.75%
Advantages of SBA-Backed Lines of Credit
- Lower interest rates than many alternative lenders
- Longer repayment terms
- Higher credit limits for qualified borrowers
Drawbacks of SBA-Backed Lines of Credit
- Strict eligibility requirements
- Lengthy application and approval process
- May require collateral
Choosing the Right Lender for Your Business Line of Credit
When selecting a lender for your business line of credit, consider the following factors:
- Eligibility Requirements: Review the minimum criteria for credit score, time in business, and annual revenue. Choose a lender whose requirements align with your business’s current situation.
- Credit Limit: Determine how much funding you need and select a lender offering appropriate credit limits. Remember, it’s often better to have access to more credit than you immediately need.
- Interest Rates and Fees: Compare the total cost of borrowing, including interest rates, origination fees, draw fees, and annual maintenance charges. Look for transparent pricing and watch out for hidden fees.
- Repayment Terms: Consider the length of the repayment period and the frequency of payments (daily, weekly, or monthly). Choose terms that align with your cash flow.
- Funding Speed: If you need quick access to capital, prioritize lenders offering fast approval and funding times.
- Collateral Requirements: Determine if you’re comfortable providing collateral and what assets you’re willing to use as security for the line of credit.
- Reputation and Customer Service: Research lender reviews and ratings to ensure you’re working with a reputable company that provides quality customer support.
How to Apply for a Business Line of Credit
Once you’ve chosen a lender, follow these steps to apply for a business line of credit:
Gather Required Documents
Common requirements include:
- Business and personal tax returns
- Bank statements
- Profit and loss statements
- Balance sheets
- Business licenses and formation documents
Complete the Application
Fill out the lender’s application form, providing accurate information about your business and finances.
Submit Supporting Documentation
Upload or provide the required financial documents to support your application.
Undergo Underwriting
The lender will review your application and may request additional information or clarification.
Review and Accept Offer
If approved, carefully review the terms and conditions of the line of credit offer before accepting.
Set Up Your Account
Complete any final steps to activate your line of credit and gain access to funds.
Conclusion
A business line of credit can provide the financial flexibility your company needs to manage cash flow, seize opportunities, and weather unexpected challenges. By understanding the various options available – from traditional banks and online lenders to SBA-backed programs – you can choose the right financing solution for your unique business needs.
Remember to carefully compare lenders, considering factors like eligibility requirements, interest rates, repayment terms, and funding speed. Whether you opt for the stability of a traditional bank, the innovation of an online lender, or the favorable terms of an SBA-backed line, the key is finding a solution that aligns with your business goals and financial situation.
With the right business line of credit in place, you’ll have a powerful tool to support your company’s growth and success. Take the time to research your options, prepare a strong application, and choose a lender that can be a long-term financial partner for your business.
FAQs About Business Lines of Credit
Q: How does a business line of credit differ from a term loan?
A: A business line of credit provides revolving access to funds up to a set credit limit. You only pay interest on the amount borrowed. A term loan provides a lump sum upfront that you repay over a fixed period.
Q: Can I get a business line of credit with bad credit?
A: While it’s more challenging, some online lenders like Fundbox offer lines of credit to businesses with credit scores as low as 600. However, you may face higher interest rates and lower credit limits.
Q: How quickly can I access funds from a business line of credit?
A: With online lenders, you can often access funds within 1-3 business days of approval. Traditional banks may take longer, sometimes up to several weeks.
Q: Are there restrictions on how I can use a business line of credit?
A: Generally, you can use a business line of credit for any legitimate business expense. However, some lenders may have restrictions on certain uses, so always review the terms carefully.
Q: Can I build business credit with a line of credit?
A: Yes, many lenders report your payment activity to business credit bureaus. Making timely payments on your line of credit can help build your business credit profile.
In another related article, Everything You Need to Know About Experian Personal Loans
