What is a Business Line of Credit?
A business line of credit is a type of small business financing that allows business owners to borrow funds on an as-needed basis, up to a preset limit. Lines of credit can help cover unexpected business expenses like inventory, payroll, or seasonal fluctuations in revenue.
Compare Business Line of Credit Offers
Get matched with lenders offering flexible credit lines. Our experts will help you find the best solution for your business.
Credit lines and rates vary by lender and creditworthiness. Rrova connects you with lending partners who make final credit decisions. Not all applicants will qualify.
Pros and Cons
Pros
- Withdraw what you need and when you need it, helping to limit over-borrowing
- You only pay interest on what you borrow, not on the total limit
- Usually has lower interest rates and higher borrowing limits than a credit card
Cons
- Not suitable for large purchases or long-term expenses
- You may need to provide collateral
- Additional draw or maintenance fees can add up over time
Requirements
Lenders typically look at the following to determine your eligibility.
Credit Score
Many lenders require a minimum credit score of 600 or higher. A higher score can help you secure a better interest rate.
Time in Business
Most lenders want a steady track record of at least one to two years in business, although some work with businesses operating for only six months.
Annual Revenue
You must show a steady income stream to qualify. Requirements vary from $36,000 to $250,000 depending on the lender.
How Businesses Use Lines of Credit
Working Capital
Cover day-to-day expenses, payroll, or seasonal fluctuations in cash flow.
Inventory Purchases
Stock up on inventory to meet demand without depleting cash reserves.
Growth Opportunities
Seize unexpected business opportunities without waiting for traditional financing.
Emergency Fund
Have funds available for unexpected expenses or business emergencies.
Where to Get a Business Line of Credit
| Lender Type | Pros | Cons |
|---|---|---|
| Banks and Credit Unions | May offer lower interest rates, many lending products, streamlined finances | Stricter eligibility, less transparent online, limited hours |
| Online Lenders | More lenient qualifying, quicker funding, online application | Higher interest rates, limited products, no in-person service |
| SBA Loans | Capped interest rates, variety of products, for those who cannot qualify elsewhere | Thorough application, longer funding times, limited funding |