A Guide to the Best Business Lines of Credit of 2021
While it's ideal to have a nest egg to tap into when your business needs to weather a financial storm, reserve funds aren’t always available. In this article, we’ll introduce you to the next best thing - business lines of credit.
Designed to help you fund a short-term project, bridge a seasonal cash flow gap, or cover operating expenses, this type of business financing is flexible and relatively affordable. You can withdraw money from your credit line and reuse the funds as you pay off your balance, keeping consistent access to borrowed capital.
Not only can this financial tool help you maintain your company’s regular operations, but it also gives you a chance to make the most of any unexpected growth opportunities.
Essentially, as long as you choose the right offer and use the funding wisely, a business line of credit can help your small business thrive and grow.
4 Best Small Business Lines of Credit
Fundbox is a California-based fintech company. Since its launch in 2013, this lender helped more than 100,000 small business owners solve inconsistent cash flow issues. Given that its lines of credit are easy to qualify for and fast to fund, Fundbox is a good choice for newly-established businesses that can’t get funding from more traditional sources. Read Review
- •Relaxed borrower requirements
- •Fast, automated application procedure
- •No prepayment penalties
Launched in 2009, Kabbage provides business credit lines of up to $250,000 to borrowers of all credit scores. The lender is well known for its streamlined online application procedures, quick decisions, and fast funding times. Kabbage is a good choice for businesses with a strong online presence. Read Review
- •Same day funding for PayPal users
- •Accepts bad credit applicants
- •Quick and easy application process
Founded in 2011, Lendio established itself as one of the largest and most popular online lending marketplaces in the United States. This loan aggregator offers its services to small and medium-sized companies and offers a wide range of funding solutions, including revolving and non-revolving business lines of credit. Read Review
- •A network of over 75 lenders
- •Quick pre-qualification process
- •Helpful customer support
Launched in 2007, OnDeck quickly became one of the most prolific small-business lenders that employs a tech-based approach when evaluating loan applications. Its lines of credit are relatively easy to qualify for, the offers are usually extended within one business day, and, in some cases, borrowers even get same-day funding. Read Review
- •Tech-based approach to underwriting
- •Quick access to funds
- •Flexible borrower qualifications
Choosing the Right Business Line of Credit — Our Methodology
If you are an entrepreneur or a small-business owner who needs additional working capital to finance day-to-day operations, bridge cash flow gaps, or take advantage of new business opportunities, a business line of credit may be the funding type you’re looking for.
Whether you’ve just started a business or run an established company with growth opportunities on the horizon, you can benefit from this business financing solution as long as you choose the right option.
Both revolving and non-revolving lines of credit for business owners give you access to a fixed amount of borrowed capital up to a predetermined limit you and the lender have previously agreed on. Borrowers can make withdrawals and use the capital each time they need to meet a short-term business need.
If you opt for a non-revolving credit line, you’ll be able to draw from your credit line until you reach your limit. Choosing a revolving business line of credit will give you access to the funds even after you’ve met the limit. As long as you keep up with the repayment schedule, the funds will be replenished.
Whatever type of business line of credit for a new business or an established company you choose, you’ll get ongoing access to additional funds, the flexibility to make fast withdrawals when you need the extra cash, and reassurances that you’ll only pay for what you use.
Applying for a credit line even when your business doesn’t need additional cash reserves can still be a smart choice. Keeping a flexible funding source on hand will give a sense of security and prepare you for any new opportunities or unexpected challenges that may come your way.
Here’s an overview of the funding terms you’ll need to look into and the eligibility requirements you’ll need to meet when applying for business lines of credit for a startup or a larger-sized business from an online lender.
Business Funding Terms
Annual percentage rate (APR)
First-time borrowers tend to confuse the annual percentage rate with the interest rate that comes with borrowed capital. Many lenders only advertise their interest rates to make their loans appear more affordable. But there are a few more costs that make up an APR, including origination fees and closing costs. These paint a clearer picture of the total business line of credit rates you’ll be charged in one year.
When evaluating offers for business credit lines, it’s also important to look at the term length defined as the time the lender will give you to repay your loan. Unlike installment loans that come with a predetermined repayment period, lines of credit can be a little more flexible.
For example, certain funding providers restart your term length each time you make a withdrawal and group all of your payments into a single debt. Also, note that the best business credit lines come with a prepayment incentive - the opportunity to save on fees if you manage to repay your loan early.
Depending on the lender’s policy, you’ll be required to make either weekly or monthly payments. Make sure to choose a repayment schedule that you can comfortably keep up with. Remember that missing a deadline may have a negative impact on your credit score and lead to costly penalties.
Collateral and Guarantees
Much like banks and credit unions, some online lenders require you to provide a personal guarantee and/or use your business assets as collateral before they fund your loan application. Secured options come with the advantage of lower interest rates, while unsecured business lines of credit are a good choice for newly-established businesses that may not have anything to offer up as collateral.
Speed of Approval and Funding Time
One of the most significant advantages of alternative funding providers is that they offer much faster approvals and funding times than banks, credit unions, or government institutions. For many business owners, time is the most valuable resource.
That’s why tracking down the lenders that can evaluate loan requests, extend offers, and fund applications as quickly as possible is of the utmost importance. In some cases, the best business line of credit is the one that you can get in just a few days.
Minimum Years in Business
While it’s true that you’re more likely to qualify for any type of business loan if your company has been operating for a decade, that doesn’t mean that there are no funding options for startups and newly-established small businesses. Even if you’ve launched your company less than a year ago, you’ll be able to find options for business lines of credit with good rates on our list.
Minimum Annual Revenue
The funding provider will probably require you to submit your business bank account information, monthly financial statements, balance sheet, and your business and personal tax return. The lenders need this information to evaluate your company’s financial standing and make an estimate of your company’s monthly or annual revenue.
Note that getting a business line of credit with no revenue in your bank account isn’t an option. However, some companies don’t require you to make hundreds of thousands a year before they decide to offer you a loan.
Credit Score Rating
Your personal credit score plays an important role when it comes to applying for business funding. While traditional lenders such as brick-and-mortar banks and credit unions probably won’t consider your loan application if you have bad credit, online lenders are much more flexible. Prospective borrowers with scores somewhere in the fair-to-excellent category will be more likely to qualify.
However, even if your score is just 550, you’ll still have plenty of business credit line options to choose from.
Best Business Lines of Credit - Detailed Reviews
Launched in 2013, Fundbox is a financial technology company that helped more than 100,000 US-based businesses overcome cash flow issues. Designed for entrepreneurs and startup owners who need the capital fast and can’t qualify for more traditional funding sources, Fundbox’s business revolving lines of credit come with a quick and fully transparent application and approval procedure.
Reasons to Choose Fundbox
One of the best things about this funding provider is its unique approach to evaluating loan applications. Instead of asking you to submit your latest monthly bank statements, Fundbox allows you to connect your business bank account or accounting software to its platform.
This eliminates the need for paperwork, facilitating a quick application process. While the approval process usually takes less than 10 minutes, you’ll receive your funds within 24 hours if you make the request before noon PST, Monday through Thursday. Otherwise, expect the cash in your account within two business days.
Fundbox also allows you to take advantage of relaxed borrower requirements. To qualify for a business credit line, you’ll need to have a minimum annual revenue of $100,000 and a personal credit score of at least 600.
The list of restricted industries is very short and includes adult entertainment, firearms and weapons, NGOs, online gaming and gambling, drugs and dispensaries, and MSBs. This online lender’s services are available in all 50 states.
It’s also important to mention that Fundbox doesn’t only charge interest rates, but also application, origination, or draw fees. Additionally, should you decide to repay the loan early, you won’t face prepayment fees.
Reasons to Look Elsewhere
Although it provides some of the best business lines of credit for bad-credit applicants, Fundbox has a few downsides.
The lender’s annual percentage rates, which range between 10.1% and 79.8%, are higher than those imposed not only by traditional funding providers such as banks, but also some online lenders. Also, the loan can only be repaid in weekly installments, and you have a choice between a 12-week or a 24-week repayment plan.
If you decide to apply for a business line of credit with Fundbox, keep in mind that the borrowing amount goes up to $100,000. This is relatively low when compared to some of the competition.
Fundbox offers both unsecured and secured business lines of credit. Small business owners are typically required to provide a personal guarantee and agree to a general lien on their company’s assets.
In conclusion, if you have been in business for just a few months and need access to some additional capital fast, Fundbox won’t fail you. Thanks to the online lender’s tech-based approach, approval takes just a few minutes, and once approved, you’ll quickly be able to withdraw money from your line of credit.
Provided that you make a request before noon PT, you can expect the funds to land on your account within one business day. However, before you decide to apply for a business line of credit from Fundbox, note that funding amounts top at $100,000, and the interest rates can be quite high.
Reasons to Apply:
- Relaxed borrower requirements
- Fast, automated application procedure
- No prepayment penalties
Operating since 2009, Kabbage has established itself as one of the most convenient providers of lines of credit for small businesses. Tailored to entrepreneurs who have trouble getting approved for loans with traditional lenders and need the funds to meet their short-term business goals, Kabbage is the epitome of fast decisions and simple application procedures.
Reasons to Choose Kabbage
One of the best things about this funding provider is its unique approach to assessing loan applications. Instead of just looking at a prospective borrower’s personal credit score, Kabbage focuses on the company’s overall financial stability.
During the application process, you’ll be asked to link your online business accounts, such as your online banking, vendor, and even social media accounts so that the lender can analyze your company’s revenue and cash flow. To improve your chances of qualifying for a small business line of credit from Kabbage, link as many accounts as you can. The deal is simple - the higher the revenue, the better the loan.
Fast access to cash is another reason to go with this provider. Not only can you complete the application process without an excessive amount of paperwork, but you can also get the cash quickly. If you choose to receive the funds via PayPal, you may be eligible for same-day funding. Alternatively, the funds will land in your business bank account in up to three business days.
Kabbage’s business credit line comes with an optional credit card with no additional fees. While this feature offers a fast and convenient way to draw from your line of credit, make sure to use it wisely.
Reasons to Look Elsewhere
Unlike some of its competitors that only subject its applicants to a soft credit pull, this lender performs a one-time hard credit check while considering your loan application. Although Kabbage doesn’t rule out bad-credit applicants, those in fair to excellent categories have a much better chance of getting approved for its unsecured business line of credit.
Another downside to this funding provider is that its speed comes at a cost. Kabbage’s APRs range between 24% and 99%, which is quite high even for an online lender. It’s also important to note that while there are no prepayment penalties, you won’t benefit much from repaying the loan early either.
According to Kabbage’s complicated fee structure, you’ll be charged the largest chunk of your interest in the first two to six months of the total repayment term.
Considering that this funding provider only offers short-term business lines of credit, those looking for larger loan amounts and longer repayment periods would probably be better off with a different lender.
Convenience and flexibility offered to prospective borrowers who aren’t able to qualify for funding from banks and need the money fast are among Kabbage’s key attributes. If you need a financial safety net to help you overcome short-term cash flow issues or cover emergency expenses, business lines of credit from this lender are an excellent choice, especially if you use PayPal.
However, if you have the time to shop around, we suggest you explore other options to see if you can qualify for lower rates and longer-term funding solutions.
Reasons to Apply:
- Same-day funding for PayPal users
- Accepts bad-credit applicants
- Quick and easy application process
Lendio is an online lending marketplace that doesn’t offer direct loans but matches prospective borrowers with the most suitable lenders. Its huge network of funders includes more than 75 partners that offer small business unsecured lines of credit.
Launched in 2011, Lendio has established itself as a one-stop-shop for financing that offers SBA loans, merchant cash advances, term loans, and equipment financing.
Reasons to Choose Lendio
One of the things users like about Lendio the most is how quick and stress-free the application process is. It shouldn’t take you more than 15 minutes to create an account and provide some basic information about yourself, as well as the size, type, and financial standing of your business.
After you’ve submitted all the necessary information, you’ll be given a list of lenders whose business loans and lines of credit you’re able to qualify for. That way, you won’t need to spend days shopping around - a single application on Lendio will give you access to multiple offers.
Additionally, considering that Lendio collaborates with more than 300 funding providers (out of which at least 75 offer business lines of credit), there are funding options available for businesses of nearly every type and size.
This lending aggregator’s funding partners offer both revolving and non-revolving lines of credit for business owners. Revolving credit lines work similarly to credit cards in that they let you draw multiple amounts up to your limit.
You are only charged interest on the total amount that you’ve used, and as you repay the loan, your available credit replenishes. Non-revolving options come as a one-time deal - after you pay off your loan, the line won’t be available to use anymore.
Applying for a secured or an unsecured business line of credit for a startup, a small business, or a mid-sized company via Lendio is completely free of charge. You can even change your mind about requesting additional capital if none of the offers meet your expectations.
Reasons to Look Elsewhere
Lendio’s partners offer funding options to startups and small to medium-sized businesses. However, if you run a company that has more than 500 employees, you may have trouble securing a credit line through this lending marketplace. Another thing to keep in mind is that funds can take a while to replenish when you pay off your debt on your business revolving line of credit.
Note that while Lendio works with a long list of lending institutions, there are no guarantees that you’ll be able to qualify for any of the offers even though you meet the minimum requirements.
If you run a startup or a small business and need a quick capital infusion to overcome some temporary cash flow problems or cover an unexpected expense, Lendio may be the perfect choice. For a business line of credit, the requirements borrowers have to meet are quite flexible, and the application process is quick and easy.
Still, keep in mind that this type of flexibility comes at a cost. Funding options offered through Lendio tend to be expensive, and some of its partners may require you to provide a personal guarantee.
Reasons to Apply:
- A network of over 75 lenders
- Quick pre-qualification process
- Helpful customer support
Founded in 2007, OnDeck is one of the first alternative online funding providers to give technology the main role in optimizing the process of evaluating borrowers’ applications and making decisions on whether to offer them funding.
Nowadays, OnDeck offers multiple funding types, including some of the best small business lines of credit. If you need quick access to some borrowed capital to bridge a cash flow gap, cover payroll, reopen your business, or hire more employees, we suggest you check out this New York-based lender.
Reasons to Choose OnDeck
Thanks to its tech-driven approach, OnDeck’s application process is fast and easy - it shouldn’t take you more than 10 minutes to complete. You’ll need to submit some basic information about yourself and your business such as your driver’s license, Social Security number, business tax ID, and the latest three monthly bank statements.
Note that you can also apply for a corporate line of credit from this provider over the phone.
Should you get approved, one of OnDeck’s financial advisors will get in touch with you within one business day to review the extended offer and help you complete the online checkout. In most cases, borrowers get the funds within 24 hours of their loan approval.
OnDeck offers revolving lines of credit which means that, as long as you make timely payments, the funds will be available for you to reuse.
Another thing that puts OnDeck’s options among the best lines of credit for a small business is that the funding provider helps you build your business credit by reporting your payment activities to credit bureaus (Experian, Equifax, and PayNet). Additionally, the lender lets you set up automatic payments so that you don’t have to worry about missing a deadline.
Make sure to repay your loan on time, and you’ll be able to qualify for better business funding terms in the future.
Reasons to Look Elsewhere
If your business is based in North Dakota or Nevada, you won’t be able to qualify for a loan from OnDeck. Also, note that this funding provider doesn’t offer business lines of credit to companies that operate from a home address.
OnDeck’s credit lines come with a $20 monthly maintenance fee. To waive the fee for the first six months, all you have to do is withdraw at least $5,000 within a week of line opening.
One of the biggest drawbacks of OnDeck’s funding solutions is that they require frequent repayments. Note that your first payment will be due one business day after you make your first withdrawal. After that, your business account will be charged with fixed weekly payments automatically. If you have uneven cash flow, OnDeck may not be the best place to get a line of credit.
OnDeck’s lines of credit are relatively easy to obtain, especially for small business owners with credit scores in fair to excellent categories. The application process takes less than 10 minutes, you won’t need to wait more than a business day for approval, and you may even get same-day funding.
However, keep in mind that funding from OnDeck can be expensive. There are no prepayment incentives, and weekly repayments are the only option.
Reasons to Apply:
- Tech-driven approach to underwriting
- Quick access to funds
- Flexible borrower qualifications
How Do Business Lines of Credit Work?
Best suited for financing short-term projects and ongoing expenses, a business line of credit is technically a loan but with a twist. Unlike a traditional term loan, a line of credit comes with a pool of available capital that a borrower can withdraw from and reuse after paying off the balance. This financial tool is similar to a credit card in that there is a limit the lender and the borrower agree on.
Although there is a set amount of capital at your disposal, you don’t need to use it all up to make the funding worthwhile. Interest rates on business lines of credit are only charged on the amount you end up using. That’s why getting this type of funding makes perfect sense if you don't know exactly how much additional capital you’ll need.
Before you decide whether to apply for a commercial credit line or look for alternatives, take a look at some of its most obvious advantages and disadvantages.
Upsides of business lines of credit:
- Helps even out cash flow.
- Gives you the chance to seize unexpected business opportunities.
- The credit line replenishes as you repay your balance.
- You only pay for what you use.
Downsides of business lines of credit:
- Not as liquid as credit cards
- Limits can be low.
- It can be expensive.
- There may be hidden fees.
Here are the steps we suggest you take when applying for a business line of credit, whether you run a newly-established company or a business that’s been operating for many years:
- Review your personal credit score and your company’s overall financial standing.
- Request quotes from multiple funding providers and compare the options.
- Check the requirements and make sure you qualify.
- Understand the cost and look for hidden fees.
- Gather the needed documentation and apply.
There are two main approaches to distinguishing between different types of business lines of credit. First, commercial lines of credit differ depending on whether they require collateral. Secured and unsecured business lines of credit belong to this category. Second, we also differentiate between revolving and non-revolving commercial credit lines.
While the revolving option lets you use the funds, repay what you owe, and make another withdrawal, the non-revolving solution lets you draw from your line only until you reach the agreed-upon limit.
Business lines of credit are usually used for covering the costs of short-term business needs such as repairing critical equipment, hiring new employees, purchasing inventory, bridging a temporary cash-flow gap, or financing a marketing campaign.