Where can I get a business line of credit?
Key takeaways
Traditional and online lenders offer small business lines of credit
Traditional lenders are best for established businesses with good-to-excellent credit
Online lenders are best for businesses that can't get funding from a traditional lender
A business line of credit can be a helpful funding tool for small businesses, allowing you to withdraw funds repeatedly as needs arise. You can get this type of loan through both traditional and online lenders. Traditional lenders can provide you with an in-person experience and offer low interest rates, provided that you have strong credit. Online lenders open up your options to multiple lenders and offer less stringent criteria to apply, even accepting businesses with bad credit.
If you feel like a business line of credit is the right funding option for your business, explore the features of several line of credit lenders to see which is the best lender for you.
Getting a business line of credit from a traditional lender
Traditional lenders, meaning banks and credit unions, often offer a business line of credit option to customers. If you’re interested in working with a traditional lender, it’s a good idea to research and talk with multiple lenders because you can find different options at each. Many offer multiple business lines of credit, including both secured and unsecured options.
There are larger traditional lending institutions — like Bank of America and Wells Fargo — and regional or local banks and credit unions.
While more businesses tend to apply at larger banks, they have a lower approval rate for small business loan applications than small banks. According to the 2023 Small Business Credit Survey, 44 percent of applicants applied at large banks, while only 28 percent applied at small banks. Of these applications, small banks approved 76 percent of applicants, while large banks only approved 66 percent.
Bankrate insight
Like other types of SBA 7(a) loans, SBA CAPLines are secured through a traditional lender and offer a line of credit of up to $5 million for working capital, contracts, builders or seasonal expenses. Note these lines come with the fees, including a guarantee fee, but they don’t require a down payment.
Pros
Can visit physical locations: Most banks and credit unions have at least one branch you can visit in person. This gives you a more personalized customer service experience and a central location for all of your business banking.
Lower interest rates: Traditional lenders often have interest rates that start lower than alternative or online lenders.
Cons
Lower approval rates: Approval rates are more favorable for online lenders. Additionally, their qualification requirements tend to be more strict
Less convenient: Some traditional lenders have online options available for loan applications and management, but they don’t all have this. If online options aren’t available, you’ll have to visit during business hours.
Who it’s best for
Traditional lenders are best for established business owners with good-to-excellent credit who prefer an in-person experience. Business owners may need a personal FICO score of at least 670 or higher and annual revenue of $200,000 to $250,000 to be eligible. These criteria are strict compared to other lenders that offer business lines of credit.
Getting a business line of credit from an online lender
Traditional lenders aren’t the only lending option for securing a business line of credit. Online lenders like Fundible and OnDeck offer business lines of credit with less stringent requirements. They may accept minimum credit scores in the mid-500s to low 600s — and may offer shorter terms than traditional lenders. They also have higher approval rates. The 2023 Small Business Credit Survey found that online lenders approved 69 percent of small business loan applications.
Pros
Convenient: Everything you need to do to apply for and manage your business loan can be done on your computer or phone.
More options available: Without the restriction of location, you can find many different lenders online.
Higher approval rates: As discussed above, approval rates are significantly higher for loans from alternative lenders. Many work with newer, smaller businesses with lower credit scores that traditional lenders would reject.
Cons
Less-personal experience: With alternative lenders, you don’t usually have the option of visiting an in-person branch. Additionally, many aspects of the lending process are automated, so you’re not interacting with actual people much.
Need to be electronically savvy: While online lenders work to make the experience convenient for customers, you’ll need to upload documents digitally and communicate online. If you have trouble with technology, this option can be more difficult.
Higher interest rates: Online lenders offset the risks they take by charging higher interest rates and fees, like prepayment penalties.
Bankrate insight
Business lines of credit may have lower credit limits when coming from an online lender. Loan sizes typically range from $5,000 to $500,000, though some go higher. By comparison, traditional lenders can offer lines of credit in the millions of dollars.
Who it’s best for
Online lenders are best for tech-savvy businesses looking at every option and businesses that have been denied loans by traditional lenders (as online lenders have higher approval rates).
With online lenders, your business may need as little as six months or a year under its belt and $100,000 in annual revenue. Online lenders are also more accepting of bad or fair credit, such as a personal FICO score of 550 to 600 or above.
Where’s the best place to get a business line of credit?
Ultimately, the best place to get a business line of credit differs for each business. Think about what you need the funds for, how much money you need and your business’s qualifications to find a lender that gives you the highest probability of approval.
When to choose a traditional lender
Traditional lenders may be ideal for you in these scenarios:
You want in-person service
You have strong credit and revenue
You want to build a relationship with the bank
When to choose an online lender
You might choose an online lender if you can’t quite meet the qualifications for a traditional lender or you fit one of these situations:
You’re a startup, have low revenue or have bad credit
You were denied a business loan from a traditional lender
You need fast funding, such as funding in 24 hours
Bankrate insight
There are always other financing options beyond a business line of credit, including:
Bottom line
A business line of credit is a convenient way to cover everyday expenses and working capital needs. Choosing a lender type gets you one step closer to selecting the perfect lender. Once you decide on your lender type, you can look into specific options from different lenders to find the best option for your business.
Frequently asked questions
Can a small business get a line of credit?Yes, a small business can get a line of credit from a traditional or online lender.
What credit score do you need for a business line of credit?It’s possible to get a business line of credit with a credit score in the mid-500s with an online lender, but you may have a lower credit limit and a higher interest rate than a business with a higher credit score and through a traditional lender.
Is it hard to get a business line of credit?A business’s ability to get a business line of credit depends on several different factors, including the age of the business, annual revenue and credit score. Before applying, review your business’s qualifications to confirm they meet the lender’s requirements.
