A business line of credit can be a lifeline for small businesses that need access to flexible working capital. But before you apply for financing or draw your first dollar, you need to understand how interest rates affect your borrowing costs.

Rates on business lines of credit vary widely depending on the lender, your credit profile, and the structure of the credit line itself. Knowing the details that impact these rates can help you compare financing offers with confidence.

The following guide breaks down how lenders set rates on business lines of credit and what interest rate ranges you can expect in 2025. Plus, learn how different types of credit lines compare and key steps you can take to position your business for more competitive borrowing offers.

Understanding business line of credit interest rates.

A business line of credit works much like a revolving business credit card, giving you flexible access to cash on an as-needed basis. You can borrow up to your approved credit limit, repay the debt, and borrow again throughout the draw period (as long as the credit line remains open and in good standing). 

Like credit cards, several details combine to determine how much you pay to borrow money with a business line of credit, including your outstanding balance. However, the primary factor that influences potential borrowing costs is your interest rate.

Interest rates on business lines of credit vary. Lenders consider several factors when evaluating your application—both to determine if you qualify for a business line of credit and to decide how much to charge you. Understanding these details can help you compare financing offers for your business more effectively.

Key components that shape business line of credit interest rates.

1. Base rate: Most lenders use a benchmark rate like the Prime Rate or the Secured Overnight Financing Rate (SOFR) as the starting point for pricing credit lines. 

2. Risk-based markup: Your personal credit scores, business credit scores, revenue, cash flow, time in business, and other factors affect how much margin a lender may add on top of the base rate. The higher the lender believes your borrowing risk to be, the higher the markup.

‍3. Fees: Annual fees, draw fees, inactivity fees, and sometimes even maintenance charges can increase your overall borrowing costs, even when the advertised interest rate looks competitive. That’s why it’s important to review both the APR and the fee schedule.

Types of business lines of credit and their rate structures.

The type of business line of credit you apply for also influences the interest rates lenders may offer you. Understanding these differences can help you select the most affordable (and best suited) financing option for your company.

Type of LOC Typical rate structure Details
Secured line of credit Lower rates Requires collateral such as equipment, inventory, or accounts receivable.
Unsecured line of credit Higher rates No collateral requirement, so lenders typically charge more to offset the increased risk.
Revolving line of credit Variable rates Rates adjust with market conditions and base rate changes.
Non-revolving line of credit Fixed, variable, or interest-only rates Borrow funds once, then repay without the ability to draw again.

Why secured vs. unsecured matters.

Lenders view secured lines of credit as less risky because they have collateral to claim if a borrower defaults on their debt. That lower risk for the lender often translates to lower interest rates for the borrower. For example, if your business pledges $50,000 of inventory as collateral, you might qualify for a lower rate on a business line of credit compared to a business seeking the same credit limit without any assets to secure the loan. 

Unsecured lines of credit, on the other hand, shift all risk to the lender. The borrower has no “skin in the game,” although the lender may still require a personal guarantee. Without collateral, the lender will often charge a higher rate to compensate for the additional risk.

Revolving vs. non-revolving credit lines.

A revolving credit line functions much like a business credit card. This financing structure is the most common business line of credit. As you pay down your balance on a revolving line of credit, you free up available credit that you can borrow against again during the draw period on your account. Because the interest rate on these accounts often track a benchmark rate, like the Prime Rate or SOFR, your borrowing costs can rise or fall with market conditions. 

A non-revolving line of credit acts more like a business term loan. Once you draw the funds, you can’t access the credit line again. Instead, if you need more capital for your business, you’ll need to reapply for funding (and likely pay off the money you already borrowed first). Some non-revolving products may feature a fixed rate or an interest-only repayment option while others offer variable interest rates. So, it’s important to pay attention to the financing terms to make sure you understand the cost. These structures can be helpful for one-time large expenses, like seasonal inventory or equipment upgrades.

Comparing business lines of credit rates: Benchmarks and what to expect.

Business owners may shop for a line of credit because they need flexible access to capital. Yet comparing offers without understanding interest rates can lead to higher borrowing costs than expected. In 2025, lenders continue to base most credit line pricing on market benchmarks and their own risk policies. If you know how these pieces fit together, it can help you better predict your own financing costs and potentially negotiate better terms.

Average interest rates and what drives them.

Most lenders tie the interest rates they offer on business lines of credit to a benchmark, such as the Prime Rate or the Secured Overnight Financing Rate (SOFR). Because of this arrangement, when the benchmark rate rises, your borrowing cost increases as well. Likewise, if the benchmark falls, you pay less. That’s the nature of a variable interest rate.For well-qualified borrowers, current rates on business lines of credit often start in the low double digits. Newer businesses or applicants with weaker credit may see APRs climb into the high-20% range. Lenders may adjust the interest rate they offer you after reviewing factors such as:

  • Creditworthiness: Lenders reward strong business and personal credit scores. For example, a good FICO® Score (670 or higher) may help you unlock lower APRs.
  • Revenue and cash flow: Steady revenue and a dependable cash flow signals to lenders you can repay debts on time and can often bring down your interest rate.
  • Loan size and term: Larger credit limits or longer repayment periods add risk for lenders. So, you might face a higher interest rate if you’re looking for either of these features in your line of credit. ‍
  • Collateral: If you pledge assets such as inventory or receivables, lenders often offer a lower APR than they would on an unsecured credit line.

Even if two businesses applied to the same lender on the same day, they would each likely receive very different financing offers because of these variables. 

Why line of credit rates vary across lenders.

Another detail that can impact the interest rate you pay on a line of credit is where you apply for financing. Banks, online lenders, and SBA-backed programs each evaluate risk in different ways.

  • Banks and credit unions: Traditional financial institutions usually advertise the most competitive starting APRs for established businesses with strong credit and collateral. But these lenders often require extensive documentation and loan processing timelines can be lengthy. 
  • Online lenders: If you’re looking for faster funding options or more flexible minimum borrowing criteria, you may want to consider applying for a line of credit from an online lender. However, online lenders may also charge higher APRs to offset the added risk. ‍
  • SBA-backed credit lines: Both traditional and online lenders offer SBA lines of credit, like SBA CAPLines, SBA Express Lines of Credit, and other options. SBA interest rates are typically competitive, but paperwork and approval can be time consuming.

It’s wise to compare several lenders to find the best combination of cost, speed, and qualification requirements to fit your business borrowing needs.

Typical rate ranges by business profile.

Here’s what many small businesses can expect to pay in 2025. The following numbers represent typical APR ranges, though individual offers may differ based on the factors above and on current market conditions.

Business profile Typical APR Range Details
Established business (good credit), secured LOC 7-12% Collateral and strong revenue, lower risk and often lower rates.
Established business, unsecured LOC 10-20% Lack of collateral adds risk, so lenders charge more.
New or small business, limited credit history 15-36%+ Often funded by online lenders at higher rates.
SBA-backed line of credit Prime + 3% to Prime +8%, or 12-17% Competitive APRs but require more paperwork and time.

Understanding how lenders set rates and how your business profile affects pricing could save you thousands of dollars over the life of your credit line. When you estimate the payments on a business line of credit, it’s eye opening to discover that even a two-percentage point difference in APR on a $50,000 balance could cost thousands of dollars in extra interest each year. Before you apply, review your credit, cash flow, and collateral to strengthen your borrowing profile.

Assessing offers and choosing the right business line of credit. 

After you understand rate ranges for business lines of credit, it’s wise to compare financing offers beyond just the advertised APR. Look beyond the cost and evaluate other key features like repayment flexibility to make sure the credit line fully supports your business borrowing needs.

Key details to compare

When you review multiple offers, focus on the following core details. 

  1. APR and fees: Consider the full cost of borrowing, including APR and all lender fees (annual, draw, maintenance, etc.).
  2. Repayment terms: Understand draw period length, repayment schedules, and whether your rate is fixed or variable. 
  3. Flexibility: Make sure the credit limit and repayment structure are a good match for your seasonal or ongoing borrowing needs. ‍
  4. Qualification criteria: Confirm minimum borrowing requirements including credit score, time in business, financial history, and other relevant risk factors.

Key questions and warning signs to consider.

Before you choose a line of credit for your business, it’s also important to ask lenders key questions to avoid surprises.

  • How often do you adjust variable rates, and how will you notify me about rate changes? 
  • What happens if I want to renew or increase my credit limit in the future? 
  • Do you charge any fees for early repayment or inactivity? 
  • Will you charge additional fees if I draw funds frequently or in small amounts? 

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Also, watch for red flags like unclear fee schedules, confusing repayment terms, or high penalty charges for inactivity or early payoff. A reputable lender should provide you with a transparent breakdown of all costs and straightforward answers to your questions. 

Improving your business’s eligibility for better rates.

Lenders reward borrowers who are well prepared, demonstrate creditworthiness, and financial stability. As a result, if you make an effort to strengthen your application before you apply, you may increase your chances of accessing more competitive interest rates.

Steps to improve your borrower profile

1. Improve your credit. Pay down revolving credit card debt, resolve delinquencies, and review your credit reports for errors to improve your credit score.

 2. Organize your finances. Gather key documents such as financial statements, tax returns, balance sheets, and cash flow reports and have them ready for lender review.

‍3. Build relationships with lenders. A history with your bank, credit union, or an existing lender could work in your favor when you apply for new financing. 

‍4. Consider collateral. If you have inventory, receivables, or equipment to pledge, those assets may help you secure a lower interest rate.

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Taking the steps above can demonstrate lower risk to lenders which often translates to better pricing and terms.

Leveraging creditworthiness and financial practices.

Your financial history plays a major role in how lenders assess risk when you apply for financing (whether a business line of credit or other types of business loans). Lenders typically look at your personal and business credit scores, annual revenue trends, and overall debt figures. They also want to see a clear business plan that outlines how you’ll use the credit line and repay it. 

Building a solid relationship with lenders is another long-term strategy that may strengthen your borrowing position—especially for businesses seeking long-term financial relationships. Consider providing regular updates about your financial performance, sharing growth plans, and maintaining open communication to build trust over time. When you demonstrate consistent repayment habits and strong financial practices, lenders may respond with better terms and lower rates.

Bottom line.

A business line of credit may help your company manage cash flow, cover seasonal costs, and take advantage of new opportunities. But the interest rate you secure plays an important role in how valuable that financing will be for your company over the long term. If you want to find the best financing available for your business, take the time to compare offers beyond the advertised APR. Review each lender’s full cost structure, repayment terms, and qualification criteria. And if you need to earn better terms, be sure to gather documentation, strengthen your credit profile, or offer collateral before you apply. The work you put in upfront could add up to meaningful savings over time.