Business Lines of Credit
Do you need a flexible business funding option to help your business thrive? If you need fast and flexible cash options, rather than locking into a long term loan like an SBA loan, consider a line of credit that you can use when you need it. Here are our recommendations for business lines of credit.
Disclosure: We may receive a commission if you obtain a loan from Kabbage or our other lending partners.
What Is a Business Line of Credit?
A business line of credit is a flexible resource that gives you access to fast business cash when you need it the most. A line of credit works similarly to a credit card, where you can “use” it only when you need it, and you pay interest and other fees on your open balances when you use your line of credit.
According to Credit Karma: A line of credit is a preset amount of money that a bank or credit union has agreed to lend you. You can draw from the line of credit when you need it, up to the maximum amount. You’ll pay interest on the amount you borrow.
How a Business Line of Credit Works
A business line of credit differs from a term loan, which provides a one-time lump sum of cash upfront, repaid over a fixed period, or term.
With a line of credit, you can keep reusing and repaying it as often as you’d like, as long as you make payments on time and don’t exceed your credit limit. Most lenders allow you to repay your full balance early to save on interest costs.
Line of credit borrowing limits — ranging from $1,000 to $250,000 — are smaller than a term loan.
Business lines of credit with lower credit limits are typically unsecured, which means collateral such as real estate or inventory is not required.
How to Qualify for a Business Line of Credit
Most traditional lenders, such as banks, require businesses to have strong revenue and at least a few years of history to qualify for a line of credit. Larger lines of credit may require collateral, which can be seized by the lender if you fail to make payments.
To apply, lenders typically require the following documentation: personal and business tax returns, bank account information and business financial statements, such as profit-and-loss statements and a balance sheet.
Online business lenders typically have looser qualifications than banks. However, these lenders are also likely to charge higher rates than banks and may have lower credit limits.
At a minimum, you’ll need at least six months in business and $25,000 in annual revenue to qualify for a business line of credit. Although some lenders don’t set a minimum credit score, borrowers most likely will need a score of 500 or higher to qualify.
Kabbage is our business working capital lending partner. If you need a small business loan to get working capital, Kabbage can be a fit for you. Learn why Kabbage is the simplest and fastest way to get up to $250,000 for your business.
How to Apply With Kabbage
- Enter basic business information and link your revenue data online or through our mobile app.
- Kabbage will review your business performance to let you know how much working capital you can access.
- Take the amount you need now and come back whenever you need more capital to grow your business.