What is the Best Business Line of Credit?

A business line of credit is a flexible financing arrangement for existing small businesses or start-up businesses.

The borrower can borrow these funds from the lender in one sum or parts until they reach their maximum credit limit.

Similar to a credit card, the borrower only repays the fees and interest on the money that is used. Once the balance is paid off the total is then replenished. 

The capital can be used to cater to short-term business needs. For example, it can be used to manage cash flow, purchase inventory, or cover the expenses of day-to-day operations, etc.

Due to the nature of a business line of credit, it is the best option for ongoing costs and offers more flexibility than a loan. 

Also, a business line of credit is recommended for those that require immediate access to the money.

If you are a business owner that wants to take advantage of this type of funding, you may be questioning which one is best for your needs. Certain features differentiate one type of business line of credit from another.

Bank of America offers both secured and unsecured business lines of credit. Both types can be renewed annually, do not incur advanced cash fees, and only charge interest once the funds have been used.

Whilst borrowers can lend $25,000 and more with a secured business line of credit, they can borrow between $10,000 to $100,000 with an unsecured business line of credit. The interest rate can range from 0.25%, 0.50% or 0.75%.

To qualify you require two years or more of business ownership with a minimal annual revenue of $250,000 for a secured line of credit and $100,000 for an unsecured line of credit. 

When approved, these funds can then be accessed online.

Wells Fargo offers two different types of unsecured business lines of credit.

The first is the Small Business Advantage line of credit which is intended for newly established businesses that have been operating for less than two years.

The second is the BusinessLine Line of Credit which is ideal for established businesses that have been operating for at least two years or more.

The credit limit of the first ranges from $5,000 to $50,000, the limit of the second ranges from $5,000 to $100,000.

Borrowers are automatically enrolled in the Wells Fargo Business Line Rewards program with the BusinessLine line of credit meaning that they can earn points for every purchase that is made using an access card.

This program does not have an annual fee, however, both the Small Business Advantage Line of credit and the BusinessLine Line of credit do incur an annual fee which can range from $95 to $175.

Both also have similar rates beginning at 4.5% with 1.75% being added to this when the line is used. These funds can be paid via check or online transfer.

A great thing about the Wells Fargo lines of credit is that they have two programs available to accommodate businesses at different levels.

Lendio is a lending marketplace that allows borrowers to lend large sums of credit for a competitive rate. The loan limit ranges from $1,000 to $500,000 over a term of 1 to 2 years.

This line of credit can easily be applied for via a fast and brief application process. The interest rates can be as low as 8% or as much as 24% and the funds can be accessed via an online transfer.

Lendio does not originate their loans directly, instead, they work with many other well-known funders some of which we have mentioned.

Bluevine is one of the best lenders for low credit rates. Borrowers can lend up to $250,000 and it is accessible to business owners that earn at least $40,000 monthly. The interest rates are also impressively low at only 4.8%.

Although the application process is slightly complex due to the robust criteria, successful applications can be approved in as little as 5 minutes. Borrowers can then access these funds via an online transfer.

Fundbox is possibly one of the most accessible funding options for those with bad credit who have struggled to qualify for financing provided by another source.

Courtesy of the easy application process, successful applications can access their funds with minimal hassle. The interest rate for a 4 week term is 4.66%. This increases to 8.99% for a 24 week term.

Similar to many other lenders, Fundbox transfers the money online or via a check. Borrowers can receive funds of up to $100,000 and only require $50,000 in annual revenue.

With Chase, borrowers can access a business line of credit or the commercial line of credit.

The aforementioned entitles borrowers to between $10,000 to $500,000 in credit, whilst the latter allows borrowers to access funds of $500,000 and more.

With the standard business line of credit, the amount is renewable over a 5 year revolving term but the initial term of a commercial line of credit is 12 to 24 months.

It can then be renewed once this time has passed. The interest rate of both will be determined by your credit history, collateral, and relationship with the bank.

For borrowers seeking convenience a Kabbage business line of credit could be the most viable option. Repayments are to be made monthly over a 6 to 18 month period.

There also aren’t any other additional fees that you will be confronted with either. The credit limit ranges from $2,000 to $250,000 and applicants should ideally have a credit score that exceeds 550.

The application process is straightforward as borrowers simply need to link their business information and they will then receive an automatic financial review.

You can also connect it to your bank account and the funds can be accessed via a computer, mobile app, or Kabbage card. Following approval, the funds are expected to take around 24 to 72 hours to approve.

Ondeck allows borrowers to access between $6,000 to $100,000. A great thing about Ondeck is that it gives discounts to customers who repeatedly renew their lines of credit.

There also aren’t any repayment penalties so lenders are given plenty of flexibility to make their payments at an appropriate time.

Unfortunately, Ondeck didn’t make it higher up our list due to the high-interest rate which currently begins at 31% and this may make it an impractical option for new business owners.

How to choose the best business line of credit?

For some, choosing the best business line of credit can be an overwhelming task. As you can see there are many different elements to consider. Before making a decision, you will likely find it useful to evaluate the following criteria.

The costs associated with the business line of credit are going to be one of the most important factors. As soon as you begin spending the money that you have borrowed you will begin to pay interest. 

The interest accrued will vary between lenders, however, the appeal of many to prospective borrowers is the low-interest rate which makes them an affordable option for new businesses in particular.

You will find others that have higher interest rates, however, there may be other features that may benefit your business such as discounts or a rewards program.

Following approval, applicants can receive the funds in a variety of ways. Most will issue the money via an online transfer but you will also find that some lenders issue the money via a check.

You will also need to consider the amount of time that the money is expected to take before being paid into your account.

The appeal of a business line of credit to many is that it offers quicker access to funds than the majority of loans, however, whilst some take hours, others can take days to process.

Another important factor is the funding requirements, whilst some will be quite lenient and flexible, others will be much more rigorous and strict.

Also, you will find some lenders that are more accepting of those with poor credit than others. Considering the funding requirements will allow you to determine which business line of credit is best for you.

Final Thoughts

As you can see there are many business lines of credit available from different lending institutions. It is important to assess the details of each to ensure that you opt for the best funding arrangement for your business's needs.