Business line of credit options for small businesses.
What is a business line of credit?
A business line of credit is a financing option that allows a business to access funds up to an approved limit. Businesses can draw funds as needed rather than receiving a lump sum upfront.
Some lines of credit are structured as revolving, meaning available credit replenishes as balances are repaid. Others may be non-revolving or structured with defined draw periods and repayment terms. Understanding how line of credit structures vary can help clarify which option may align with your business's needs.
Unlike a traditional term loan, which provides a fixed amount with a repayment schedule, a line of credit is generally designed to offer more flexibility in how and when funds are accessed.
A business line of credit is often used to:
- Manage seasonal revenue gaps
- Cover short-term operating expenses
- Purchase inventory
- Bridge receivables timing
- Handle unexpected costs
How business lines of credit work.
1. Approval and credit limit.
After applying, a lender may approve your business for a maximum credit limit based on factors such as revenue, time in business, credit profile, and overall financial position. This approved limit represents your maximum amount available to draw.
2. Drawing funds.
Once approved, you can request funds up to your available credit limit. Rather than receiving a lump sum upfront, businesses draw only what they need. Funds may be deposited into your business bank account, depending on the lender's process.
3. Repayment structure.
Repayment terms vary by lender. Some lines of credit are revolving, meaning available credit replenishes as balances are repaid. Others may be non-revolving, with defined repayment periods for each draw and limited additional avialbility until renewal of the line. Payment frequency may be weekly or monthly, depending on the product.
4. Ongoing access or renewal.
For revolving products, businesses can continue drawing funds as long as the account remains in good standing and available credit exists. Non-revolving structures may require renewal or reapproval once the balance is repaid. Specific terms depend on the lender and product structure.
Compare line of credit options in the Lendio platform.
QuickBooks – Line of Credit*
**QuickBooks Line of Credit loans are issued by WebBank.
***Loans are typically deposited within 1-2 business days. Actual funding time can vary depending on third party processing time.
BlueVine – Line of Credit
OnDeck – Line of Credit
Idea Financial – Line of Credit
Fundbox – Line of Credit
Headway Capital – Line of Credit
Minimum requirements for a line of credit.
*Qualification criteria, rates, and other funding terms will vary depending on the type and location of your business, and upon other factors. This is not a guarantee of funding, and it should not be relied upon as an accurate assessment of the availability or terms of the represented funding products.
How to get a small business line of credit.
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²Advertising Disclosure: Lendio may provide compensation to the entity who referred you for financing products and services listed on our site. This compensation may impact how and where certain products and services are offered to you. We may not list all financing products and services available to you. The information provided by Lendio is intended for general informational purposes only and should not be construed as professional tax advice. Lendio is not a tax preparer, law firm, accountant, or financial advisor. Lendio makes no guarantees as to the completeness, accuracy, or reliability of the information provided. We strongly recommend that you consult with a qualified tax professional before making any decisions. Reliance on any information provided by Lendio is solely at your own risk, and Lendio is not liable for any damages that may result from the use or reliance on the information provided.
FAQs
Find answers to some commonly asked questions about lines of business credit.
To qualify for a business line of credit you will need to have a credit score of 600 or higher and have a proven track record of generating revenue. Newer businesses can look at line of credit options for startups.
You can obtain a business line of credit without needing collateral. This type of credit is called an unsecured line of credit, and it does not require you to put up any collateral. However, it can be more expensive due to higher interest rates. Lenders take on a greater risk when lending unsecured funds, which is why they charge higher rates of interest.
A small business loan is a lump sum of money that is given to the borrower upfront and repaid over time with interest. It is ideal for one-time investments or larger expenses. A line of credit, on the other hand, allows the borrower to access a predetermined amount of funds as needed and only pay interest on the amount used. It’s better suited for recurring or ongoing expenses. Learn more about business loans vs. lines of credit.
A line of credit and a credit card both offer access to funds as needed, but there are some key differences. A line of credit typically has higher limits, longer repayment terms, and may have lower interest rates compared to a credit card. It also requires an application process and may require collateral. On the other hand, a credit card is usually easier to obtain and can be used for smaller, everyday purchases.
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