// Funding
Business Line of Credit: How It Works, Who Qualifies, and Where to Apply
A business line of credit is revolving access to cash — you draw what you need, pay interest only on what you use, repay, and draw again. It sits between credit cards and term loans: more flexible than a loan, cheaper than credit cards, and the best safety net a small business can have. Here's how it works.
Line of Credit vs. Loan vs. Credit Card
| Feature | Line of Credit | Term Loan | Business Credit Card |
|---|---|---|---|
| How you get money | Draw as needed, up to your limit | Lump sum upfront | Swipe/charge as needed |
| Interest | Only on what you draw | On full loan amount from day 1 | On unpaid balance |
| Typical APR | 8–25% | 6–30% | 16–26% |
| Revolving | Yes — repay and reuse | No — one-time disbursement | Yes |
| Typical amount | $10K–$250K | $5K–$5M | $1K–$50K |
| Best for | Cash flow gaps, inventory, seasonal needs | Equipment, expansion, large purchases | Daily expenses, travel, small purchases |
| Collateral | Sometimes (secured vs. unsecured) | Usually required for large amounts | Not required |
| Impact on credit | Builds business credit | Builds business credit | Builds business credit |
When You Need a Line of Credit
→ Cash flow gaps: You invoice net-30 or net-60, but your bills are due now. A line of credit bridges the gap.
→ Seasonal inventory: You need to buy $40K in inventory before your peak season. Draw it, sell the inventory, repay.
→ Unexpected expenses: Equipment breaks, a key client delays payment, an opportunity appears. Having a credit line means you don't scramble.
→ Payroll smoothing: Revenue fluctuates but payroll doesn't. A credit line ensures you never miss payroll.
→ Growth spending: Hire a contractor, run an ad campaign, or take on a large project before the client pays.
Qualification Requirements
| Factor | Bank / SBA Line | Online Lender |
|---|---|---|
| Time in business | 2+ years preferred | 6 months minimum |
| Annual revenue | $100K+ | $50K+ |
| Personal credit score | 680+ (700+ preferred) | 600+ (some accept 550+) |
| Business credit score | Helpful but not required | Usually not checked |
| Collateral | May require for large lines | Usually unsecured |
| APR range | 8–15% | 15–80% (factor rates common) |
| Approval speed | 2–6 weeks | 1–3 days |
Where to Apply
| Provider | Credit Line Range | APR | Best For |
|---|---|---|---|
| Chase Business | $10K–$500K | ~Prime + 1–5% | Established businesses, existing Chase relationship |
| Bank of America | $10K–$100K | ~Prime + 2–5% | Existing BofA customers |
| Wells Fargo | $10K–$150K | ~Prime + 1–4% | Strong credit, established business |
| Bluevine | $6K–$250K | Starting at 7.8% | Online businesses, fast approval |
| Fundbox | $1K–$150K | Starting at 4.66% (per draw) | Early-stage, invoice-based businesses |
| OnDeck | $6K–$100K | Starting at 29.9% | Lower credit scores, fast funding |
| SBA CAPLine | Up to $5M | Variable (SBA rates) | Seasonal businesses, contract-based businesses |
Secured vs. Unsecured
Unsecured: No collateral required. Based on your revenue and credit. Higher APR, lower limits, easier to get. Most online lenders offer unsecured lines.
Secured: Backed by business assets (accounts receivable, inventory, equipment) or a personal guarantee. Lower APR, higher limits, harder to qualify. Banks typically offer secured lines.
Most small businesses start with an unsecured line from an online lender and graduate to a bank line as they grow.
How to Maximize Your Approval
→ Separate business and personal finances (see our Banking guide)
→ Build business credit with a business credit card for 6-12 months first (see our Business Credit guide)
→ Keep personal credit score above 680
→ Have 6+ months of bank statements showing consistent revenue
→ Keep your debt-to-income ratio below 40%
→ Apply at your primary bank first — existing relationships help
The Action Plan
Just starting out: Get a business credit card first. Build 6-12 months of credit history and consistent revenue, then apply for a line of credit.
6+ months, $50K+ revenue, 600+ credit: Apply at Bluevine or Fundbox for a fast online approval. Use it strategically and pay it off quickly.
2+ years, $100K+ revenue, 680+ credit: Apply at your bank (Chase, BofA, Wells Fargo) for the best rates. Also consider SBA CAPLine for seasonal businesses.
Golden rule: Get approved when times are good. Keep it at zero balance. Use it only when the math works — the revenue from using the credit must exceed the interest cost.
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Disclaimer: This guide is for informational purposes only and is not financial advice. Terms, rates, and qualification requirements vary by lender and change frequently. Always compare multiple offers before accepting a line of credit.