Best Business Line of Credit for 2020

Part of being a small business owner is having the right tools to put out fires fast. Unfortunately, most proverbial fires take money — not water — to put out. A business line of credit is a revolving loan with a credit limit that’s available to draw on whenever you need some cash for your company. The line of credit is yours to access as you need, without having to apply for a loan, or explain why you need the funds.

If you don’t have a small business line of credit, what are you waiting for? Your odds for getting one are good — 73% of business applicants are approved for one, compared to a 52% approval rate for a Small Business Administration (SBA) loan. We reviewed banks and alternative lenders and rated them with our SimpleScore to compare and review the best business lines of credit available.

The Simple Dollar’s Top Picks for Best Business Line of Credit for 2020

Bluevine
Bluevine
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OnDeck
OnDeck
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Kabbage
Kabbage
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The 6 best business lines of credit 2020

Business lines of credit at a glance

Lender APR Draw Period Max. Amount Key Benefit
BlueVine starts at 4.8% 12 months $250,000 5-minute approval
FundBox 10.10%–59% 12 weeks $100,000 No minimum credit score
OnDeck 13.99%–39.90% 6 months $100,000 For simple, quick funding
StreetShares 8%–39.99% 36 months $250,000 Best for established companies
Bank of America 4.50%–25.50% 12 months $100,000 Link your business bank accounts
Wells Fargo 4.25%–13% Up to 5 years $100,000 Three different lines of credit

BlueVine: Best for High Growth Potential

BlueVine is a lender capable of servicing small and growing businesses by addressing evolving funding needs.

APR:
starts at 4.8%
Draw Period:
6 or 12 months
Max Amount:
$250,000
SimpleScore
3.2 / 5.0
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SimpleScore
BlueVine: Best for High Growth Potential
3.2
  • APR
    1
  • Loan Size
    3
  • Product Variety
    2
  • Resources
    5
  • Fees
    5
There are two BlueVine business lines of credit available — Flex6 and Flex12. Flex6 is the shorter-term product with a repayment period of six months. Most businesses are likely to qualify for Flex6, while more established businesses may be approved for a higher credit limit and Flex12, with a term length of 12 months.

Developing lasting relationships with your business funding sources could make it easier to get approved for loans in the future. Companies that are just starting out may only qualify for the short-term program, but could later apply for credit limits of up to $250,000 and have a year to repay the amount. BlueVine is a good source for companies that anticipate high growth in the future — and need the capital to make it happen.

Full review

Our Two Cents — Your business doesn’t have to suffer from growing pains — BlueVine can adapt and grow with your company’s capital requirements.


FundBox: Best for Short-Term Funding

FundBox is best for businesses that are able to pay back cash draws in six months or less.

APR
3.49% - 19.99%
Draw Period:
12–24 weeks
Loan Amount:
$100K
SimpleScore
2.8 / 5.0
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SimpleScore
FundBox: Best for Short-Term Funding
2.8
  • APR
    1
  • Loan Size
    3
  • Product Variety
    2
  • Resources
    5
  • Fees
    5
Fundbox's business line of credit may be one of the simplest to qualify for. The lender doesn't have minimum personal credit score requirements — all you need to show is that your business has been operating for at least three months and is on track to earn $50,000 in annual revenue. FundBox is more willing to take risks in providing a small business line of credit to startups, but you’ll need to pay back the funds sooner than other lenders.

FundBox’s short repayment period of 12 or 24 months may sound like it’s not enough time to repay the draw, but the shorter period will save you money. A higher APR and a weekly draw fee of at least 4.66% can really add up — it’s best not to drag out repayment of the money you borrowed from your line of credit.

Full review

Our Two Cents — The best small business line of credit for debt commitment-phobes — you’ll need to pay back what you borrowed in 12 or 24 weeks.


OnDeck: Best for Fair Credit

If you have a credit score of at least 600, you could qualify for a small business line of credit.

APR
13.99%–39.90%
Draw Period:
6 months
Loan amount:
$100K
SimpleScore
2.6 / 5.0
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SimpleScore
OnDeck: Best for Fair Credit
2.6
  • APR
    1
  • Loan Size
    2
  • Product Variety
    2
  • Resources
    5
  • Fees
    3
If your business hasn’t established business credit yet, OnDeck will work with your personal credit to provide you with the revolving line of credit your business may need. You’ll need at least fair credit to qualify, so pull up your credit report and make sure it looks good. Just remember that if your business doesn’t repay the line of credit in six months as per the terms, your personal credit score may be affected.

Besides business lines of credit for borrowers with a less-than-perfect FICO, OnDeck will reward long-term customers with a discount on their interest rate. Each time you renew your line of credit, you’ll receive a small discount to help you save money on the funding you use.

Full review

Our Two Cents — OnDeck doesn’t stand out enough in any category, but it’s a good Plan B if your first-choice lender doesn’t work out.


StreetShares: Best for Veterans

If you’ve served your country, StreetShares thanks you by providing loans designed for retired military small business owners.

APR:
8%–39.99%
Draw Period:
36 months
Loan amount:
$250K
SimpleScore
3.8 / 5.0
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SimpleScore
StreetShares: Best for Veterans
3.8
  • APR
    3
  • Loan Size
    3
  • Product Variety
    5
  • Resources
    5
  • Fees
    3
You don't need to be a veteran to apply for a business line of credit from StreetShares, but the alternative lender’s small business loan products and credit lines were designed for veterans. Known as the Patriot Express Line of Credit, this product will take a little bit of work to apply and qualify for.

StreetShares will analyze your personal credit, requiring a credit score of at least 620. You’ll need to submit company financials, such as bank statements and tax returns. It may sound like a lot of work, but once you’re approved, you can draw as little or as much of the credit line at your disposal. StreetShares provides one of the higher credit limits on this list — if you’re approved for $250,000 and need to borrow the bulk of the funds, you have three years to pay it back.

Full review

Our Two Cents — Get funding for business operations from fellow veterans that understand your needs.


Bank of America: Best for Existing Customers

Take advantage of Bank of America’s interest rate discounts for existing customers through the Preferred Rewards loyalty program.

APR:
4.50%–25.50%
Draw Period:
12 months
Loan amount:
$100K
SimpleScore
3.6 / 5.0
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SimpleScore
Bank of America: Best for Existing Customers
3.6
  • APR
    5
  • Loan Size
    2
  • Product Variety
    4
  • Resources
    3
  • Fees
    4
Bank of America provides customers business lines of credit of up to $100,000. Depending on the age and revenue of the business, you can qualify for an APR of as low as 4.50%, one of the best business lines of credit rates in this list.

The bank believes in fostering strong relationships and rewards customers through the Preferred Rewards program. If you already do business with Bank of America by having your business accounts with the financial institution or have other types of loans with it, you could receive an additional discount on your line of credit’s interest rate. Depending on the tier of Preferred Rewards membership you have you can get a discount of 0.25% off your business line of credit’s Gold tier, 0.50% for Platinum, and 0.75% off for Platinum Honors.

Full review

Our Two Cents — If you’re already an existing Bank of America customer, it’s time to ask them to show you the money.


Wells Fargo: Best for Multiple Options

You’ll have access to three types as well as the lowest business line of credit rates in our round up.

APR:
4.25%–13%
Draw Period:
5 years
Loan amount:
$100K
SimpleScore
4 / 5.0
close
SimpleScore
Wells Fargo: Best for Multiple Options
4
  • APR
    1
  • Loan Size
    3
  • Product Variety
    2
  • Resources
    5
  • Fees
    5
Wells Fargo is one of two traditional banking institutions that made the best business lines of credit roundup, but it doesn’t approach business liquidity lending in a stodgy way. It offers three different options consisting of one secured and two unsecured lines. Regardless of whether a business is in its early stages or established and has been around for a few years, Wells Fargo has a business credit line that will provide your company with the cash flow insurance it needs.

Banks are usually tight-fisted about lending to new businesses, but Wells Fargo offers companies that have been in business less than two years a chance to apply and qualify for a credit line. Business owners can spread out repayment over five years, which wouldn’t be advisable if it wasn’t for the low interest rate.

Full review

Our Two Cents — Start with Wells Fargo for the best rate when you’re shopping around for a small business line of credit.

What is a business line of credit?

A business line of credit is like a hybrid of a credit card and a business loan. You’ll get approved for a certain amount of money, which will be your credit limit. You can borrow a portion or all of the amount available in your line of credit over time. It works like a credit card in the sense of having an ongoing amount of money you can borrow, which needs to be paid back with interest. The difference is your business line of credit limit is likely higher than your personal credit card’s limit.

How business lines of credit work

When your company has a business line of credit, you can access the funds whenever you need. It’s referred to as a revolving line of credit because money is drawn and repaid, in a revolving-door fashion. Lenders set a repayment period for the amount of your credit line you draw, known as the draw period. A draw period of 24 weeks means you’ll pay the amount you borrowed back every week for 24 weeks. In the case of a draw period of six months, you’ll be expected to repay the draw each month for six months.

Most business lines of credit don’t have prepayment fees — you may repay the balance sooner than the draw period. But there may be other fees you should be aware of, such as monthly maintenance fees and late fees. Additionally, some lenders will charge a draw fee that’s typically a small percentage of the amount you borrow.

[More: What Is a Line of Credit and How Does it Work?]

How to qualify for a business line of credit

Qualifying for a business line of credit depends on the lender you choose to apply with. Some lenders require you to personally guarantee the loan, meaning your personal credit score will be one of the factors considered for business for a line of credit approval. The main drawback of personally guaranteeing a business loan is the risk it poses to your credit score — if your company is unable to repay the line of credit, it will affect your personal credit. If you’re applying for a small business line of credit that doesn’t require a personal guarantee, be prepared to provide several months of business bank statements, the most recent tax return, and financial statements, such as a balance sheet and profit and loss statement.

Business line of credit vs. business loans

More businesses are approved for a business line of credit than a loan. If you need capital, it’s likely you require the cash immediately. A business loan is a one-time arrangement for a certain amount of money, meaning you’d need to apply for a loan every time you need funding. Having to apply for a business loan could take days to weeks before you get approved. In contrast, you only need to apply for a line of credit one time — once you’re approved, you could borrow and replenish the funds as often as you need.

[Learn More: Best Small Business Loans]

Line of credit vs. credit cards

Credit cards and lines of credits are similar products. They’re both considered revolving loans, meaning you can draw from your available funds and pay it back in installments. A business credit card is another essential financial tool for a business to operate efficiently. It can be used to fund larger, short-term purchases without having to apply for a loan. But credit cards have their drawbacks — you likely have a smaller credit card limit than you would if you had a business line of credit. And in many cases, a credit card’s APR is higher than a line of credit.

How to choose the best business line of credit for your business

Choosing the right line of credit is crucial to your company’s bottom dollar. Some lenders charge a number of fees and a higher interest rate that could cost you more than you bargained for. There are plenty of business line of credit providers, but not all may meet your needs. Some work with established companies with big revenue. Others are more willing to fund startups. Follow these steps to choose the best business line of credit:

  1. Review your company financials to know what your business revenue is
  2. Research business line of credit providers
  3. Don’t forget to ask the financial institution you already bank with if it offers business lines of credit
  4. Evaluate your selection of lenders by comparing interest rates, terms and fees to narrow them down to a shortlist of contenders
  5. Ask the lenders on your shortlist what the requirements are for qualifying for a business line of credit — you may need to rule out some of the lenders because your company doesn’t meet the minimum requirements.
  6. If one of the lender requirements is a personal credit check, make sure your credit score is as high as possible. Review your credit report for errors and pay down your personal debts to improve your credit score.
  7. Choose a lender and apply

[Related: How to Build Business Credit]

Business line of credit FAQs

Should I get a line of credit through my bank?

You don’t have to limit yourself to a business line of credit through your bank. There are alternative lenders that may provide better features and interest rates, potentially saving you money over the life of the line of credit. Weigh your options by comparing interest rates, fees, and terms from your existing bank and at least two other lenders to decide on the best business line of credit for you.

Why should I get a business line of credit?

There are times when a customer invoice payment is late or your business needs to cover a cash shortfall knowing you’re about to close an important sale. A business line of credit is the ideal short-term liquidity solution — draw the funds you need today and repay it over the agreed amount of time. And once you receive the invoice payment or the sale closes, you can pay off the line of credit balance due without prepayment penalties.

Too long, didn’t read?

Small business lines of credit provide your company with the money you need quickly. Once you’re approved for one, you can draw a portion of your credit limit or the full amount. You’ll need to pay the funds back over a specified amount of time and at a certain interest rate. It’s crucial to compare lenders to get terms that work for your company and get the best business line of credit rates.

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Methodology

The SimpleScore is our proprietary scoring metric to compare products and services at The Simple Dollar in a transparent, evidence-based way. Our editorial team identifies five quantifiable aspects to compare for every brand, determines the rating criteria for each aspect score, then averages the five aspect scores to produce a single SimpleScore. For business lines of credit, we compared APR, draw periods, resources, support and fees for every major lender. Our ratings are meant to be a directional tool to help you in the process of choosing a business line of credit provider. Be sure to continue your research and shop around for the best business line of credit that fits your specific needs.

We welcome your feedback on this article and would love to hear about your experience with the business line of credit providers we recommend. Contact us at inquiries@thesimpledollar.com with comments or questions.

Cynthia Paez Bowman
Cynthia Paez Bowman
Contributing Writer

Cynthia Paez Bowman is a finance, real estate and international business journalist. Her work has been featured in Business Jet Traveler, MSN, CheatSheet.com, Bankrate.com and Freshome.com. She owns and operates a small digital marketing and public relations firm that works with select startups and women-owned businesses to provide growth and visibility. Cynthia splits her time between Los Angeles, California, and San Sebastian, Spain. She travels to Africa and the Middle East regularly to consult with women’s NGOs about small business development