Business Line of Credit: Where to Find Flexible Cash

A business line of credit can provide crucial capital for small-business owners and flexibility that a regular loan just doesn’t have.

With a business line of credit, you’re authorized (but not required) to borrow up to a specific amount — say, $10,000 — and pay interest only on the money borrowed. You then draw and repay funds as you wish, as long as you don’t exceed your credit limit. The concept is similar to a business credit card, but getting a cash advance from a credit card is pricier. A line of credit also differs from a traditional small-business loan, in which you receive a lump sum of cash upfront, then repay it over weekly or monthly installments.

Having access to a business line of credit can help you better manage cash flow, handle unexpected expenses, buy inventory, or fund other short-term business needs. Business lines of credit are also typically unsecured debt, which means you won’t have to provide collateral (assets, such as real estate, that can be sold by the lender if you default).

Here are a few of the best options for small-business owners seeking a line of credit, and the qualifications required by each lender.

Best business line of credit for managing cash flow: Lending Club

Lending Club’s line of credit provides from $5,000 to $300,000. It’s a good option for managing cash flow or handling surprise expenses, as there’s no cost to open the line of credit, and there aren’t any monthly maintenance or inactivity fees.

The only costs for Lending Club’s line of credit are a 1%-2% draw fee each time you borrow and an annual interest rate on borrowed funds from 6% to 21.6%, which is equivalent to an annual percentage rate of 8% to 32%, according to Tom Green, Lending Club’s vice president of small business.

To qualify, you need to own at least 20% of the business, have a minimum of $75,000 in annual revenue, been in operation at least two years, have a minimum personal credit score of 600, and no recent bankruptcies or tax liens. Only lines of credit over $100,000 require collateral. The company files a UCC-1 lien on your business assets, which means it can seize those assets if you fail to repay the loan.

Lending Club line of credit

Loan amount: $5,000 to $300,000 APR: 8% to 32% Loan term: Draws are repaid monthly over a maximum of 25 months Approval time: Less than a week for funding Read our Lending Club review

Learn More Apply on Lending Club’s secure site

 

Best business line of credit for bad credit: Kabbage

Kabbage provides lines of credit from $2,000 to $100,000, with the amount borrowed repaid monthly over a period of six months. This line of credit is a good option for small-business owners who have bad personal credit, as the lender does not require a minimum credit score to qualify. Check out other bad credit business loan options.

Also, Kabbage is one of the few lenders that does not require a personal guarantee, which is a written agreement pledging your personal assets to repay a loan if the business can’t.

Although collateral and a personal guarantee aren’t required, you still need to meet other qualifications, including annual revenue of at least $60,000 and at least one year in business, and you must have a business checking or PayPal account that Kabbage can link to.

Kabbage

Loan amount: $2,000 to $100,000 APR: 20% to 113% Loan term: 6 months Approval time: A few minutes to several days Read our Kabbage review

Learn More Apply on Kabbage’s secure site

 

Best business line of credit if you need fast cash: OnDeck

OnDeck is a solid choice for business owners who need fast business loans for working capital or emergencies, as the online application takes about 10 minutes, with funding as soon as 24 hours. You can borrow up to $100,000, with draws repaid weekly over a period of six months.

To qualify, borrowers will need to have been in business at least 12 months, have a majority owner with a personal credit score of 600 or higher with no personal bankruptcies in the past two years, and have annual revenue of $200,000 or higher. Your business also cannot be on OnDeck’s restricted industries list.

Although collateral or liens aren’t required for OnDeck’s line of credit (unlike the company’s term loans, which require a blanket lien on business assets), you will be required to sign a personal guarantee.

OnDeck

Loan amount: Up to $100,000 APR: 14% to 36% Loan term: Repaid weekly for six months Approval time: Decisions within minutes; funding in as little as 24 hours Read our OnDeck review

Learn More Apply on OnDeck’s secure site

Best business line of credit for buying inventory: Dealstruck

Dealstruck is a lender that offers an inventory-based line of credit that finances 100% of your inventory purchases up to $500,000. Every draw you make on the line of credit is repaid weekly over a period of 24 weeks, and you can repay the debt in full to save on interest if you wish. It’s an ideal option for businesses that have recurring inventory purchase needs but don’t have the cash on hand to buy the inventory.

To qualify, borrowers need to have a minimum personal credit score of 600, no bankruptcies in the past two years, have been in business — profitably — at least one year, and earn at least $12,500 a month in revenue. You need to sign a personal guarantee, and Dealstruck takes a lien on business assets. Learn more about Dealstruck’s application process in our step-by-step guide.

Dealstruck inventory line of credit

Loan amount: Up to $500,000 APR: 11% to 22% + prime rate Loan term: 6 months per draw Approval time: Prequalification in minutes, offer letter in 2-3 days, average of 10 days to funding Read our Dealstruck review and learn more about the application process

Learn More Apply on Dealstruck’s secure site

Business line of credit: The bottom line

A business line of credit is designed to provide flexibility, allowing you to tap it on an as-needed basis. Borrowers should carefully compare the terms of each product before applying, including the APR for the line of credit, the maximum credit limit offered, the length of the repayment term, and collateral or personal guarantee requirements.

Find and compare small-business loans

NerdWallet has created a comparison tool of the best small-business loans to meet your needs and goals. We gauged lender trustworthiness, market scope and user experience, among other factors, and arranged them by categories that include your revenue and how long you’ve been in business.

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Steve Nicastro is a staff writer at NerdWallet, a personal finance website. Email: Steven.N@nerdwallet.com. Twitter: @StevenNicastro.

To get more information about funding options and compare them for your small business, visit NerdWallet’s small-business loans tool. For free, personalized answers to questions about financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.

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