Small Business Line of Credit: Everything You Need to Know


Small businesses are the backbone of the American economy, and a line of business credit can be the difference between success and failure. A line of credit can provide much needed cash flow in difficult times or help you expand your business when opportunities arise. In this article, we will talk about how to get a small business loan (line of credit), including how it works and its benefits.



What is a Small Business Line of Credit?

It is one of the most flexible small business financing options. It can be used to cover business expenses, such as inventory, marketing, or unexpected costs. Lines of credit tend to have lower interest rates than other types of financing, making them an attractive option for most business owners.

How does an unsecured business line of credit work?

This type of financing allows you to borrow money without providing any collateral. With an unsecured line of credit, you will usually pay interest on the money you owe, but you won’t have to worry about losing your home or other assets if you can’t pay off the loan.

Benefits of a Small Business Line of Credit

A commercial line of credit can provide many benefits to business owners. Here are just five:

  • Cover unexpected expenses. A line of credit can give your business the financial ability to adapt and cover unexpected costs, such as a sudden drop in sales or an unplanned repair.
  • Take advantage of opportunities. With a business line of credit, you will have the working capital available to take advantage of the opportunities that present themselves. This could include expanding your business or taking on a new project.
  • Manage cash flow. Commercial lines of credit can help you manage your cash flow by giving you access to funds when you need them. This can be especially useful during slow periods or when you are waiting for bills to be paid.
  • Lower interest rates. Commercial lines of credit tend to have lower interest rates than other types of financing, making them more affordable in the long run.
  • Flexibility. Business lines of credit offer the flexibility to borrow only the amount you need, when you need it. You will also have the flexibility to repay the loan over time, making it easier to manage your working capital.

How do you qualify for small business lines of credit?

The rating for a line of business credit will vary by lender, but there are some general requirements that most lenders will look for offline and online. Here are five criteria for choosing the lines of credit for your business.

  • Personal credit score. Most lenders will analyze your personal credit score to determine your eligibility for a secured line of business credit. A higher credit score will usually qualify you for a lower interest rate.
  • Business income. Lenders will also want to see proof of your company’s revenue. This could include tax returns, company bank statement statements, or financial projections.
  • Time in business. The longer your business has been running, the more likely you are to qualify for a business line of credit. Lenders will want to see that you have a track record of timely monthly payments and of managing your finances well.
  • Collateral. Although not required, some lenders may ask for collateral to secure the loan. This could include commercial assets such as equipment or inventories.
  • Business plan. Finally, lenders may want to see a business plan that describes your business goals and how you want to use business line of credit funds.

Top lenders for small business owners looking for a line of credit

We will then take a look at the leading online lenders of secured and non-secured business lines of credit. In case you missed it, Bank of America launches a new credit card and a small business line of credit.

1. Blue vine

If you’ve been in business for at least six months and have a minimum credit score of 600, Bluevine will give you a line of credit between $ 6,000 and $ 250,000.

2. Wells Fargo

To get a $ 5,000 to $ 100,000 commercial line of credit without any necessary Wells Fargo collateral, you will need to be in business for two years. They do not reveal what minimum credit score is required.

3. Col.

Anyone for Kabbage’s $ 1,000,000 to $ 150,000 financing, you must have been in business for at least a year and have a credit score of 640 or higher.

4. US Bank

US Bank will give you a line of credit of up to $ 100,000 (unsecured) or $ 250,000 (insured) with a credit score of 680 and two years of business.

You can get a commercial line of credit from $ 6,000 to $ 100,000 through OnDeck if you’ve been doing business for a year and have a credit score of 600.

6. TD Bank

Borrow up to $ 100,000 from this online lender with a credit score above 650. The best part is that even new businesses meet the requirements to get business lines of credit with this lender.

7. Credibly

It will credibly provide you with up to $ 250,000 in financing as long as you have a credit score of 560 and have been in business for six months or more.

8. Lendio

Get financing for between $ 1,000,000 and $ 500,000 from Lendio with a credit score of just $ 560. Plus, your business only needs six months to be eligible.

9. SBG funding

At SBG Funding, you can borrow up to $ 150,000 if you have been in business for at least six months and have a minimum credit score of only 500.

10. Bottom box

To get a line of credit of up to $ 150,000 from Fundbox, you’ll need a credit score of $ 600 and your business only needs to be open for at least six months.

Small business line of credit versus business credit card

There are some key differences between business credit cards and lines of credit (which are small business loans). Business credit cards are easier to qualify for, but they tend to have lower credit limits and higher interest rates. Business loans are more difficult to obtain, but they tend to have lower interest rates and higher credit limits.

Is a line of credit a good idea for a small business?

Yes. It gives you the ability to borrow money when you need it, up to a certain limit, and then return it over time. In general, a line of credit is a good option for a small business owner who needs access to cash but does not want to go into debt.

What credit score do you need for a business line of credit?

Most lenders require a minimum credit score of 680 to qualify. However, there are some lenders who are willing to accept scores as low as 580. A higher credit score tells lenders that you are a lower risk borrower and are more likely to pay off your debt on time and in full. .

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