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.

Lending Partner
APR Range
Loan Amount
Term
In this article

    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 6 best business lines of credit 2020

    Business lines of credit at a glance

    LenderAPRDraw PeriodMax. AmountKey Benefit
    BlueVinestarts at 4.8%12 months$250,0005-minute approval
    FundBox10.10%–59%12 weeks$100,000No minimum credit score
    OnDeck13.99%–39.90%6 months$100,000For simple, quick funding
    StreetShares8%–39.99%36 months$250,000Best for established companies
    Bank of America4.50%–25.50%12 months$100,000Link your business bank accounts
    Wells Fargo4.25%–13%Up to 5 years$100,000Three different lines of credit

    *Rates accurate as of July, 2020

    Best for High Growth Potential – Bluevine

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

    APR Range
    15%–88%
    Loan Amount
    Up to $250,000
    Term
    Varies
    SimpleScore
    3.6 / 5.0
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    SimpleScore Bluevine 3.6
    APR 3
    Max 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.

    Bluevine Disclosure

    1. For businesses organized as a limited liability company or corporation, we do not perform a hard credit pull at any point in our process, which means your credit score will not be impacted. For businesses organized as sole proprietors or general partnerships, we will only perform a hard credit pull after you receive and accept your offer.

    2. The rate is a simple interest rate calculated from total repayments over 26 weeks.

    3. Once approved, get funds deposited in your bank account in as quickly as a few hours if you choose our bank wire option ($15). Or, choose our free ACH transfer option which typically gets funds deposited the next business day, although it may take up to three.

    Best for Fair Credit – OnDeck

    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.

    APR Range
    16.9%–99.4%
    Loan Amount
    $5K–$50K
    Term
    3–36 months
    SimpleScore
    2.6 / 5.0
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    SimpleScore OnDeck 2.6
    Median APR 1
    Loan Amount 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.

    OnDeck Disclosure

    *There are some industries we cannot serve (see list of restricted industries), as well as some industries and states impacted by the Coronavirus to which we are temporarily not lending. In addition, OnDeck does not lend to businesses in Nevada, North Dakota or South Dakota. OnDeck is no longer accepting new Paycheck Protection Program (PPP) loan applications. Registration terms and conditions apply. Instant Funding registration and withdrawals are currently supported from your desktop and the OnDeck mobile website. They are not currently supported in the OnDeck mobile app. Occasionally, transfer may take up to 30 minutes to complete due to potential Visa & bank processing lags. This benefit is available at no additional cost with a vast majority of major banks participating. Instant Funding is available for transactions between $1K-$10K.

    Best for Veterans – StreetShares

    Get funding for business operations from fellow veterans that understand your needs.

    APR Range
    9%–40%
    Loan Amount
    $2K–$100K
    Term
    3 months–3 years
    SimpleScore
    4 / 5.0
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    SimpleScore StreetShares 4
    APR 4
    Max Credit Line Amount 5
    Draw Period 4
    Resources 5
    Fees 2

    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.

    Best for Existing Customers – Bank of America

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

    APR Range
    as low as 3.00%
    Loan Amount
    $10K–$100K
    Term
    12–60 months
    SimpleScore
    3.8 / 5.0
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    SimpleScore Bank of America 3.8
    Rates 4
    Loan Size 4
    Product Variety 2
    Resources 5
    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.

    Best for Multiple Options – Wells Fargo

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

    APR Range
    5.99%–24.49%
    Loan Amount
    $3K–$100K
    Term
    12–84 months
    SimpleScore
    4 / 5.0
    close
    SimpleScore Wells Fargo 4
    Rates 5
    Loan Size 5
    Customer Satisfaction 3
    Support 4
    Fees 3

    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.

    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 lines 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

    Business line of credit FAQs

    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.

    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.

    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.

    Methodology

    SimpleScore

    We’ve created the SimpleScore to help you objectively compare products and services here at The Simple Dollar.

    Our editorial team:

    • Identifies five factors to compare across each brand
    • Determines the rating criteria for each factor
    • Calculate an average of those five factor scores to get one SimpleScore™

    We break down each of these five factors and their rating criteria for our review of the best auto loan companies of 2020.

     

    Why do some brands have different SimpleScore on different pages?

    Some brands offer a variety of financial products, which is why they have different SimpleScores on different pages. We rate individual products that brands offer — not the brand as a whole. 

    For instance, in our American Express personal loans review we rated the company a 4.25 out of 5 based on rates, loan amount, customer satisfaction, customer support and fees. In our review of the best small business loan rates, American Express earned a 3.4 out of 5 SimpleScore based on its business loan product. By tailoring our SimpleScore to each financial solution, we’re able to give you a more accurate view of each brands’ services and how they compare to competitors’ products.

    Median APR

    Lenders with a lower median APR are awarded higher scores — because even if you’re APR is average, your business is not.

    Maximum loan size

    Lenders that dole out loans with high maximums are also rewarded with higher scores. It takes money to run a business, and businesses need access to as much capital as it takes.

    Product variety

    Need more than just a business loan? Lenders that offer more than one type of financial product for businesses score higher than others that don’t.

    Educational Resources

    We gave out higher scores to lenders that have the following subjects covered in their blogs: loans, marketing, employee and staff, and credit or finance resources.

    Fees

    Fees can add up fast and eat into operating costs –– that’s why we give a higher score to lenders that have fewer fees.

    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

    Reviewed by

    • Courtney Mihocik
      Courtney Mihocik

      Courtney Mihocik is an editor at The Simple Dollar who specializes in insurance, personal finance, and loans. Previously, she wrote and edited for Interest.com, PersonalLoans.org, Ballantyne Magazine, Thread Magazine, The Post, ACRN, The New Political, Columbus Alive and the Institute for International Journalism.