A business line of credit (LOC) is good for small businesses that want a revolving credit line they can use over and over again for recurring or unexpected expenses. There are numerous types of line of credit products, each right for different borrowers. You can review each one below or take the quiz to determine which LOC is right for you.
Unsecured Business Line of Credit
An unsecured business line of line of credit is the easiest LOC to qualify for and can typically fund in as little as 24 hours. You won’t have to provide any collateral to secure your credit line and you can borrow up to $250,000 at a time. You’ll only be charged interest for the amount you’ve borrowed and once you repay, you can borrow those funds again.
Line of Credit Amount
- Up to $250,000
Line of Credit Costs
- APR: 9.99% – 40%
Line of Credit Terms
- Repayment Terms: Up to 12 months
- Repayment Schedule: Weekly or monthly
- Time to Funding: One to three days
Minimum Qualifications
- Minimum Credit Score: 550+ (check your credit score for free)
- Annual Business Revenue: $50,000+
- Time in Business: One+ year
Where to Find an Unsecured Business Line of Credit
An unsecured business line of credit is typically originated by online lenders. You can learn more by reading our article on the best small business line of credit providers.
How to Apply
When applying for an unsecured LOC, you’ll fill out an online application and provide your basic personal and business information. This application can be completed in about 10 minutes and you can be funded in one to three days. You can learn more by reading our small business line of credit guide.
Secured Business Line of Credit
A secured business line of credit (LOC) is similar to an unsecured LOC in that it’s typically revolving and you only pay interest on what you borrow. However, unlike an unsecured line of credit, secured LOCs are typically provided by a traditional loan provider, like a bank. You will likely get a better interest rate but will also have to provide collateral to secure your line.
Loan Amount
- Up to $1 million, but typically less than $250,000
LOC Costs
- APR: 6% – 10%
LOC Terms
- Repayment Terms: One to five years
- Time to Funding: Two to three weeks
Minimum Qualifications
- Minimum Credit Score: 680 (check your credit score for free)
- Collateral: Real estate or liquid business account (savings, CD, etc.)
- Time in Business: Two+ years
Where to Find a Secured Business Line of Credit
You can find a secured business line of credit at a variety of traditional lenders, mostly banks or credit unions. Since many lenders are willing to use your business savings account as collateral, your current bank is a good starting place.
How to Apply
Business Credit Cards
Business credit cards are revolving credit lines that you can use again and again as you pay off the balance. Credit cards are typically the first type of financing any business can qualify for and they’re a good fit for any business owner. Many business credit cards will also reward you with either cash back or points.
Loan Amount
- Up to $100,000, but typically less than $20,000 for small businesses
Interest Rates & Fees
- APR: 12% – 29%, some will have a 0% APR introductory period
- Annual Fee: $0 – $250 per month
Loan Terms
- Repayment Terms: 30 days interest-free
- Time to Funding: Instant approval, and you’ll receive the card in two to twelve days
- Rewards: Vary by card, but can be 1%-5% that convert to points or cash back.
Minimum Qualifications
- Minimum Credit Score: 640+ (check your credit score for free)
Where to Find Business Credit Cards
The business credit card you apply for will likely depend on your personal credit profile and the type of reward you want. To learn more, check out our article comparing the best business credit cards or our article on the best personal credit cards for small business owners.
How to Apply
The application process typically takes place online within a few minutes. In most cases, you’ll get an immediate approval decision and if approved, you’ll receive your card in the mail within two to twelve days. To learn more, read our guide on when to use a credit card to fund your business.
Invoice Financing
Invoice financing, also called accounts receivable (AR) financing, is like a line of credit that uses your outstanding customer invoices as collateral. You get financed for the value of your customer invoices up to an approved maximum, and when you repay what you’ve borrowed, you can borrow again. You typically can’t borrow the full invoice amount, but it’s a great way to unlock the value of your invoices quicker than waiting for your customers to pay.
Loan Amount
- Up to $5 million
Invoice Financing Costs
- Discount Rate / Fee: 2% – 4.5% monthly
- Advance Rate: 80% – 100%
Terms
- Repayment Terms: Up to 90 days
- Time to Funding: One to three days
Minimum Qualifications
- Minimum Credit Score: Not required – 530+ (check your credit score for free)
- Collateral: The invoices you finance
Where to Find Invoice Financing
Invoice financing can typically be found via online lenders. You can learn more by comparing the best AR financing lenders in our buyer’s guide.
How to Apply
Applying for invoice financing generally takes place online, and only takes a few minutes. Once approved, you’ll be able to select the customer invoices you want to finance through an online platform and you’ll get funded in as quick as one business day. You can learn more about this process by reading our ultimate guide to invoice financing.
Invoice Factoring
Invoice factoring occurs when an invoice factor company effectively purchases your outstanding invoices at a discount. They’ll first advance you up to 95% of your invoice values, and then charge a discount rate or fee per invoice. While you don’t get 100% of your invoices, this is a great way to get paid fast for what you’re owed.
Loan Amount
- $30,000 – $20 million per month
Invoice Factoring Costs
- Discount Rate / Fees: 0.5% – 4% per invoice
- Advance Rate: 90% – 95%
Invoice Factoring Terms
- Repayment Terms: Customers have up to 90 days to pay off invoice, but you make no payments
- Time to Funding: Up to two weeks for initial approval, funding in 24 hours for every invoice funded after approval
Minimum Qualifications
- Minimum Credit Score: N/A – creditworthiness of your customers is more important
- Collateral: The invoices you’re selling to your factor
- Other Requirements: Must factor invoices of $30,000+ per month
Where to Find Invoice Factoring
Traditional lenders, like large banks, often offer invoice factoring to businesses with $30,000+ invoices per month. You can learn more about the best factors by reading our article on the best factoring companies.
How to Apply
The application process for invoice factoring will vary by factor, but you’ll need to either speak to them in person or on the phone to see if you qualify. You can learn more by reading our guide to invoice factoring.
Home Equity Loan or Line of Credit
A home equity line of credit (HELOC) is a form of financing that uses the equity in your personal home as collateral. While this isn’t financing directly for your business, it can be used for business purposes. The home equity line of credit gives you a revolving credit line to use over and over again and works just like a traditional business line of credit.
Loan Amount
- Up to 80% – 90% of your home equity
Interest Rates & Fees
- Interest Rate: 4% – 8%
- Fees: Closing costs of 2% – 5% and you could be charged an annual fee or prepayment penalty
HELOC Terms
- Repayment Terms: Five to fifteen years
HELOC Terms and Qualifications
- Minimum Credit Score: 620+ (check your credit score for free)
- Other Requirements: Must have 20%-30% equity in your home and a positive financial history
Where to Find a Home Equity Line of Credit
You can receive a HELOC from specialty lenders who lend using real estate as collateral. A good place to find lenders is LendingTree, which is an online marketplace where you can review offers from multiple lenders at once.
How to Apply
The application process will vary by lender but it will require documentation on your home, like a valuation and proof of ownership. Read our HEL or HELOC article to learn more.
Short-Term Loan
Some business line of credit products are marketed as small-term loans but actually function as a revolving credit line. You can draw against your loan like revolving credit, but each draw is treated as a small loan with fixed payments. Short-term loans are typically more expensive financing products, but the total cost of capital is competitive with other LOCs.
Loan Amount
- Up to $250,000
Interest Rates & Fees
- APR: 30% – 50%
Loan Terms
- Repayment Terms: Up to 12 months
- Time to Funding: One to three days
SBA Loan Qualifications
- Minimum Credit Score: 550+ (check your credit score for free)
- Time in Business: One+ year
- Minimum Annual Revenue: $50,000+
Where to Find Short-Term Loans
These loans are typically originated by online lenders. You can learn more by reading our comparison of the two best short-term loan providers, Kabbage and OnDeck. Both of these lenders also offer a business line of credit product.
How to Apply
You’ll fill out an online application that asks for basic personal and business information within about 10 minutes. You can get pre-approved instantly and funded in as quickly as one day. You can learn more about these online lenders by reading our article on the best business line of credit products.
SBA CAPLines
The Small Business Administration (SBA) offers a program to help businesses get approved for up to a $5 million working capital line of credit. Each line of credit funded is for a specific purpose, like for builders needing to buy materials and pay for labor associated with contracts or seasonal businesses needing to get ready for their busy season. For this reason, an SBA CAPLines loan is not a good fit for unexpected expenses or to keep for a rainy day.
Loan Amount
- Up to $5 million, but small asset-based lines have a limit of $200,000
Interest Rates & Fees
- Interest Rate: 5% – 10% (check current SBA loan rates)
- Origination Fee: 0.5% – 3.5%
- Loan Packaging Fee: $2,000 – $4,000
- SBA Guarantee Fee: 0% – 3.75% (Learn more about SBA guarantee fees)
SBA CAPLines Terms
- Repayment Terms: Up to five years
- Time to Funding: 45 – 90+ days
Minimum Qualifications
- Minimum Credit Score: 680 (check your credit score for free)
- Collateral: Accounts receivable, inventory, purchase orders, or customer contracts
- Other Requirements: No recent bankruptcies, foreclosures, or tax liens; business owners must personally guarantee 20%+ of the total funding amount
Where to Find SBA Loans
SBA CAPLines financing can be found at many traditional lenders offering other SBA loans. You can learn more by reading our article on the top 100 SBA lenders.
How to Apply
Any SBA financing process is long and requires a lot of paperwork. You can learn more by reading our article on how to apply for an SBA loan. You can also learn more about SBA CAPLines by reading the section we have on them in our types of SBA loans article.
Bottom Line
If you’re looking for a line of credit to pay for recurring or unexpected expenses, then you have plenty of options. For quick funding, we recommend an unsecured line of credit from an online lender. However, you can check out all of your options above or by reading our article on the best small business line of credit to find the best lender for you.
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