Up to $500,000
Estimated Repayment Terms
6 months - 3 years
Starting @ 8%
Speed of Funding
As fast as 1 day
Business Lines of Credit: The Flexible Financing Solution
To sustain success, your business needs to establish a consistent cash flow to pay employees, cover costs and invest in projects that will grow your company.
With a business line of credit, you can spend and payback—as well as reuse— capital as needed.
Business lines of credit give you the capacity to handle emergencies and opportunities equally, offering the peace of mind and security you need to manage your cash flow best.
How Do Small Business Lines of Credit Work?
The main features that make a small business line of credit attractive are purchase and payment flexibility. Similar to a credit card, the line can be used when needed and paid off when suitable for the business. Repayment terms generally fall within the 6-month to 3-year span, and credit limits are typically higher than their credit card counterpart.
Business Credit Line vs. Credit Card
While a small business line of credit and a business credit card may seem similar, there are three distinct differences between the two.
Access to Working Capital
A line of credit can provide you with up to $150,000, while credit cards commonly offer limits of $50,000. While it’s possible to receive a cash advance from your business credit card, they’re typically only used for credit purchases. With a line of credit, you can deposit your funds directly into your bank account without incurring additional fees.
While a business credit line is quite flexible, business credit cards provide more leeway when it comes to repayment. There is no set repayment term for a credit card. Small business lines of credit, on the other hand, come with a set end date. Borrowers will pay either daily, weekly or monthly installments over the course of 6 months to 3 years.
Fees and Rewards
Business credit cards usually offer attractive rewards programs that lines of credit cannot. These card perks typically come with an annual fee which recoups the cost of these benefits for the provider. While small business lines of credit don’t feature any rewards programs, they don’t carry any annual fees.
The Different Types of Business Lines of Credit
Business lines of credit can be secured or unsecured. Let’s compare and contrast each type to understand the difference.
Secured Lines of Credit
Secured lines of credit require businesses to collateralize the credit line, meaning high-value assets are needed to secure the funds against the risk of default. Collateral is typically an asset which the lender can assume ownership of and liquidate to pay off the balance of the loan or credit line in the event of default.
The most common assets used to secure a credit line include:
- Real estate
- Personal or company vehicles
- Home equity
- Accounts receivable (e.g., unpaid invoices)
Unsecured Lines of Credit
Unsecured credit lines can be obtained without collateral. This means that in the event a business defaults on their credit line, the lender would have no pledged securities to leverage to recoup on losses.
However, lenders providing unsecured business lines of credit protect themselves by other means, mostly by reducing credit limits, charging higher interest rates, shortening terms and requiring a personal guarantee commitment.
Because of this, unsecured business lines of credit have their benefits and their drawbacks. On the upside, the application process is streamlined. Applicants often receive a decision within hours and funds as fast as the same day. On the downside, an unsecured business line of credit typically carries a higher overall cost than their secured counterparts.
Is a Business Line of Credit Right for You?
Flexibility and variety of uses are the signature features of a small business line of credit. While their uses are numerous, they’re not always the best solution for everyone.
When you should consider a small business line of credit:
- Your need for funding is open-ended
- You’re unsure of exactly how much you’ll need, but project costs could exceed your original estimates
When you should consider other options:
- Your funding needs are finite
How to Qualify for a Small Business Line of Credit
Qualifying for a flexible financing product like a LOC requires specific business traits regarding your time in business, annual revenue and personal credit score.
For example, companies with less than 2 years in business will most likely qualify for short-term, unsecured lines of credit, while businesses who’ve been around longer than two years are likely eligible for long-term lines of credit.
The more established your business and the stronger your credit is, the easier it will be to qualify for any program.
Do You Qualify?
Based on previously approved borrowers, you’re likely to qualify if:
- You’ve been in business 6+ months
- Your annual revenue is $160K+
- You have a credit score of 575+
How to Apply for a Small Business Line of Credit
While banks often require a lengthy vetting and application process before they’re willing to grant a commercial line of credit, online lenders use more streamlined processes that can provide funds as soon as the same day.
Fast Capital 360 reduces the amount of time it takes to find the right lender that meets your business’s needs by helping you navigate the application process with state-of-the-art technology and expert customer service.
Step 1: Tell us about your business.
Fill out a few basic questions about your business so that we can connect you with the best lenders.
Step 2: Tell us about you.
We need to learn about you so we can determine your eligibility without impacting your credit score.
Step 3: Connect your bank account.
Your revenue data enables us to match you to funding opportunities at the speed of modern business.
Step 4: Get funded.
Funds can be deposited into your bank account as soon as the same day.
What Will a Small Business Line of Credit Cost?
Depending on your creditworthiness, your estimated interest rates for a business line of credit can be as low as 6 percent or be as high as 24 percent. While the average rate is 8 percent, there are multiple factors that affect final costs.
Your Credit History
Personal credit history helps lenders understand how effectively you manage and repay debt, allowing them to better assess your risk.
The higher the credit line, the greater the risk for your lender. Greater risk equals higher interest rates.
Your business’s structure, industry and unique attributes can influence your risk, depending on how it affects your earning abilities.
In general, the amount you receive, combined with your unique business qualifications, will influence how much you pay to access the business line of credit.
Business Line of Credit Example
Explore Small Business Line of Credit Use Cases
Here are just a few examples of how you can run and grow your business with a business line of credit.
Business owners sometimes turn to a business line of credit to help cover inventory expenses during a slow season, or just to stock up on supplies in case of an emergency.
For business owners that need to purchase a new piece of equipment or are even looking to upgrade, a business line of credit can be used to finance that cost.
If a company is suffering from a slump, a business line of credit can help cover everyday operational costs.