A small business line of credit is there when you need it, but you don’t pay for it if you don’t use it. For example, you might need to buy materials to fulfill a large order. You can use your business line of credit to purchase the materials, and you’ll pay interest on the amount you borrowed. Once the customer pays you for the order, you can pay off the credit line. If you pay off the entire balance, you won’t pay any more interest until you tap into the line of credit loan once again. The annual fee varies depending on the credit line chosen and the amount borrowed.
You have many options to choose from when considering business lines of credit; learn how to get one and what to look for when choosing from the best lines of credit for your business.
Use this table to quickly see the best business line-of-credit options:
|7 Best Business Lines of Credit|
|Business Line of Credit||Type||Annual Fee||Funds||How to Apply|
|Wells Fargo Business Line of Credit||Unsecured||$0, $95 or $175||$5,000-$100,000||Learn More|
|Bank of America Secured Business Line of Credit||Secured||$150 or $250||From $10,000||Learn More|
|Bank of America Unsecured Business Line of Credit||Unsecured||$150||$10,000-$100,000||Learn More|
|Santander Bank Business Line of Credit||Unsecured||$250||From $10,000||Learn More|
|PNC Bank Secured Line of Credit||Secured||Varies||$100,001-$3 million||Learn More|
|PNC Bank Choice Credit Business Line of Credit||Unsecured||$175||$20,000-$100,000||Learn More|
|Kabbage Small Business Line of Credit||Unsecured||Monthly fee when you have a balance||Up to $150,000||Learn More|
How to Get a Business Line of Credit
Applying for a business line of credit is like applying for any other loan. You’ll need to fill out an application and wait for a decision from the lender. A line of credit is different from a loan, however, because you only use a line of credit as you need it. Once you draw on it, you begin to pay interest on the amount you’ve used. When you pay the principal back, you can borrow that amount again. In this way, it’s similar to a credit card.
Business line of credit requirements usually take into account how long you’ve been in business, your revenue and whether you have collateral to secure the loan. Business lines of credit for start-up companies can be difficult to come by unless you have collateral. Collateral includes business assets that you pledge against the amount you owe. If you default on your loan, the lender can take the collateral to satisfy the debt.
If you pledge collateral, your line of credit is secured. If you don’t have collateral, you’ll need to get an unsecured business line of credit.
To find the best business line of credit for you, check out these seven options.
Related: How to Get a Business Loan
Annual Fee: $0 for credit lines up to $9,999; $95 for credit lines from $10,000 to $25,000; and $175 for credit lines from $25,000 to $100,000
Funds: Up to $100,000
Best For: New businesses that might grow quickly
The “Wells Fargo BusinessLine” line of credit provides a revolving line of credit of $5,000 to $100,000 to small businesses with no collateral required. BusinessLine is for businesses that have been in operation for two years or longer, and Small Business Advantage, another option from Wells Fargo, is for businesses that have been in operation for less than two years.
The Small Business Advantage product has a five-year term, at which point you can apply for the BusinessLine product. Rates start at prime plus 1.75 percent, and interest is only charged when you use the account. Borrowers receive a MasterCard access card and easy-to-use checks.
Annual Fee: $150 or $250
Funds: Starting at $10,000
Best For: Businesses that are already doing business with Bank of America or who have multiple accounts they can move there
The Bank of America Secured Business Line of Credit is available for businesses that have collateral to put up against the credit line. Collateral can be a blanket lien on general assets or a certificate of deposit. The interest rate is a competitive variable rate that is based on the prime rate.
Bank of America will consider your business relationship with the bank when setting your interest rate, so if you have your business checking, savings or other account with Bank of America already, you might get a better interest rate. If you have other BofA accounts, you can get a better rate on your line of credit, use the credit line for overdraft protection for your business checking account, and easily transfer between accounts.
Annual Fee: $150
Funds: $10,000 to $100,000
Best For: Companies that do all of their business banking with Bank of America
If you’ve been in business at least two years under the same ownership, you can apply for an unsecured credit line from Bank of America. The interest rate is based on the prime rate. It’s a revolving credit line so you don’t pay any interest until you use it. It’s a good alternative to using small business credit cards to bridge the distance between accounts payable and accounts receivable, or manage your seasonal inventory. If your business qualifies, no collateral is required.
Access the cash easily by using the Visa card provided or by transferring funds directly into your Bank of America checking account. If you have other BofA accounts, you can often get a lower rate on your credit line, transfer money easily between accounts, and set up automatic payments so you always pay on time.
Annual Fee: $250
Funds: $10,000 to $150,000
Best For: Businesses that are at least two years old or have an SBA guarantee
If you’ve been approved for an SBA loan, look into this line of credit from Santander. It’s a low-cost way to get the working capital you need to help your business grow.
The unsecured credit line from Santander is available to businesses that have been operating for more than two years, or less if you have an SBA guarantee. A $250 origination fee applies, but can be waived if you open a business checking account at the same time. This flexible credit line is good for managing the short-term cash flow fluctuations that a lot of small businesses encounter as they try to grow.
Annual Fee: Variable
Funds: $100,001 to $3 million
Best For: Manufacturing businesses or those that have equipment or inventory they can use for collateral
PNC Bank’s secured line of credit is a good choice for businesses that have collateral and need significant working capital. With non-real estate business assets to secure the loan, businesses can qualify for a revolving credit line of $100,001 to $3 million. You can access funds by writing a check or making a transfer into your PNC business checking account. The loan is reviewed and renewed annually.
If you have customers who place large orders but take 30 days or more to pay, this credit line can help you stay on top of your cash flow. This credit line also provides overdraft protection for your PNC business checking account.
Annual Fee: $175
Funds: $20,000 to $100,000
Best For: If you and any partners have good personal credit but no collateral
For loans for $20,000 to $100,000, PNC Bank has an unsecured business line of credit for businesses that do not have collateral. If you’re already a PNC Bank customer, you can apply online. Otherwise, apply by phone or stop into a branch. They’ll need some basic information about your business and each business owner.
With this offering from PNC Bank, you can use the credit line, pay it off and use it again. The interest rate is variable, based on the prime rate.
Monthly Fee: For every month you have a balance
Funds: Up to $150,000
Best For: Companies who need to manage receivables
Kabbage provides small businesses with unsecured lines of credit of up to $150,000. Your payment is one-sixth of the total amount if you have a six-month loan, or one-twelfth of the total amount if you have a 12-month loan, plus a monthly fee. For every month you have a balance, you’ll pay the monthly fee. Your monthly payment is automatically deducted from your checking account, but you can make additional payments manually if you want.
If your business offers 30-day terms to your customers, this loan can help you make ends meet while you wait for payments. The Kabbage line of credit isn’t the best choice if you need to make a large purchase that you want to pay off slowly.
Methodology: GOBankingRates.com identified the best business lines of credit by evaluating factors including if loans are secured or unsecured, collateral requirements, annual fees, credit limits and rates. All fees and rates are subject to change at the credit card issuers’ discretion. And, some offers might no longer be available on the issuers’ websites, depending on how you access the web page.
GOBankingRates is a personal finance and consumer interest rate website owned by ConsumerTrack, Inc. an online marketing company serving top-tier banks, credit unions, and other financial services organizations. Some companies mentioned in this article might be clients of ConsumerTrack, Inc., which serves more than 100 national, local and online financial institutions. Rankings and roundups are completely objective, and no institution, client or otherwise, paid for inclusion or specific placement. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone and have not been reviewed, approved, or otherwise endorsed by the companies included in the article.