Business Line of Credit: What It Is and How to Get One

Last updated Feb. 24, 2025
Advertiser Disclosure
If you’re in search of a flexible form of financing for your small business—one that can help you handle cash flow gaps, access more working capital, address an emergency, or take advantage of a business opportunity—then a business line of credit may be a fit.
A business line of credit is a type of small-business loan that gives access to a pool of funds to draw from when you need capital. A real upside to this form of financing is that you don’t make payments or incur interest until you actually tap into the funds.
Ready to shop and apply? Begin by entering your desired loan amount below, and we'll get started on matching you with the best line of credit options for your small business.

How much do you need?

No cost to you

Your credit score won't be impacted

Compare multiple lenders with one application

Business Line of Credit At a Glance

Repayment Term6 to 24 months
Interest Rates10% to 99%
Funding SpeedAs fast as 1 day
Line Amount$1,000 to $1 million

How Does a Business Line of Credit Work?

Business lines of credit are similar to credit cards: A lender approves you for a set amount of financing (similar to a credit limit), which you can draw from at your discretion.
Once you repay what you’ve spent, you can continue to draw capital from your line of credit. This type of financing is considered revolving credit because you can tap into it again and again.

Types of Business Lines of Credit

A business line of credit can be secured or unsecured.
  • Secured business line of credit. A secured line of credit is backed by physical collateral, such as inventory or equipment. If you can’t repay your credit line, your lender can seize your assets to recover their losses.
  • Unsecured business line of credit. An unsecured credit line doesn’t require physical collateral. Some lenders, however, will still require a personal guarantee or a UCC lien on your business assets.
Because secured business lines of credit help mitigate risk for the lender, they tend to have more competitive rates and terms than unsecured options. Unsecured lines of credit, however, can still be a good option for those who need fast access to capital—as well as for new companies that don’t have enough collateral to offer.

Pros and Cons of a Business Line of Credit

Pros

✔️ Only pay interest on the funds you draw.
✔️ Flexible funding that can be used for a variety of short-term needs.
✔️ Can be accessible to startups and borrowers with bad credit.

Cons

✖️ May have to pay additional fees (draw fees, account maintenance fees, etc.) that increase the total cost.
✖️ Not suitable for large purchases or investments.
✖️ Can have shorter repayment terms than more traditional loans.

Qualifications for a Business Line of Credit

*Based on past Fundera customers
Dollar bills with pink background.
Annual RevenueOver $180K
Calculator and invoice with pink background.
Credit Score630
Invoice with blue background.
Time in BusinessOver 1 year

How to Qualify and Apply for a Business Line of Credit

If you think a business line of credit is the right option for you, follow these steps to see if you qualify and start your application.

Determine what type of funding you need

Think about how much capital you need and how you plan to use it. You should also consider whether you’d prefer a secured or unsecured line of credit. If you’re looking for a secured line of credit, you’ll want to make sure you have a valuation of the collateral you plan to use.

Evaluate your qualifications

Most lenders will evaluate your business using your personal credit score, time in operation, and annual revenue. The specific business line of credit requirements you’ll need to meet, however, will vary based on the lender.
In general, it’s helpful to be able to meet the following minimum qualifications:
  • Personal credit score: 600+
  • Time in business: Six months to one year
  • Annual revenue: $50,000 to $100,000+

Compare lenders

Research and compare multiple options to find the best fit for you. You’ll want to look for a lender whose requirements you can meet and one who offers the type of credit line you need. Keep in mind that banks and SBA lenders will offer the most competitive rates and terms, but have strict qualifications. Online lenders, on the other hand, have more flexible qualifications but higher interest rates.

Complete and submit your application

If you’re working with an online lender, you’ll usually be able to complete the application process quickly. These companies typically ask for basic information about your business and a few supporting documents. Traditional lenders, on the other hand, often have a more detailed process. Plus, some banks may require you to apply in person.
In general, you’ll need:
  • Copy of personal identification
  • Business employer identification number
  • Personal and business bank statements
  • Personal and business tax returns
  • Financial statements, such as a profit and loss statement and balance sheet
Online lenders may be able to approve and fund your application as quickly as the same day. Traditional lenders may take anywhere from several days to several weeks to issue funding.

Fundera Can Help

We’re here to take some of the work of finding a small business line of credit off your plate.
Just answer a few questions—with no impact to your credit score and free of obligation—to see which lines of credit you qualify for. One of our trained sales associates will personally advise you through the entire process, from comparing options to signing your agreement.
Let’s get you funded!

How much do you need?

No cost to you

Your credit score won't be impacted

Compare multiple lenders with one application

Frequently asked questions

You can use a business line of credit for a variety of purposes, including:

Paying for ongoing operating expenses

Covering cash flow gaps

Taking advantage of unexpected opportunities

Providing a cushion to protect against emergencies

Managing seasonal downturns in sales

The total cost of a business line of credit will depend on your interest rate and any fees. Unlike a business term loan, however, you only pay interest on the cash you draw.

Say, for example, you have a $25,000 line of credit and use $5,000 to purchase inventory. If your interest rate is 10% with a repayment term of six months, you’ll pay back $5,146.86 (or $5,000 plus $146.86 in interest).

Once that’s paid off, you can continue making additional draws up to the $25,000 maximum.

You may be able to borrow anywhere from $1,000 to $1 million or more with a business line of credit. Online lenders tend to have lower maximum credit line amounts, whereas banks and SBA lenders can offer more funding. SBA lines of credit, for example, are available up to $5 million.