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What’s a Business Line of Credit?
When you own a small business or run a startup, it’s possible to run short of cash from time to time. One popular method of financing is called a business line of credit, sometimes abbreviated as BLOC.
Businesses can use lines of credit for just about anything:
- Startups can scale up staffing
- Small businesses can cover accounts payable
- Medium-sized businesses can renew equipment leases
How Is a Business Line of Credit Different From Other Loans?
You’re probably already familiar with credit cards and loans. A business line of credit like a hybrid of these two lending products, as we show here:
|Business Line of Credit||Term Loan||Credit Card|
|Borrowing Limit||$1,000 to $250,000||$250,000+||Less than $250,000|
|Payments||Pay as you owe||Fixed||Required minimum monthly|
With a BLOC, you usually only pay interest on the amount of credit you’ve used. Collateral isn’t usually required on unsecured BLOCs at lower amounts.
Features to Compare
Your first time applying for a BLOC can feel a bit intimidating, but in reality it’s pretty easy. If you’ve ever had a credit card or a car loan, you’ll recognize these terms.
- Minimum Credit Score to Qualify – Credit scores are required by most banks and for most loan products.
- APR – Annual percentage rate is the interest you’ll need to pay on your credit balance.
- Speed of Funding – How quickly you can get access to your BLOC.
Business Lines of Credit Providers
Here’s a quick overview of popular business line of credit accounts that are geared to startups and small- to medium-sized businesses.
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Kabbage specialize in business lines of credit, issuing over $7 billion in credit to 185,000+ small businesses in the US.
To qualify, at minimum, your business needs $50,000 annual revenue and under your ownership for at least a year. There’s no application fee. Kabbage offer BLOCs up to $250,000.
US Business Funding
US Business Funding specializes in offering equipment leases and working capital up to $10,000,000.
Their rates for BLOCs start at 3.50% APR and they lend for amounts $10,000 and up. Once you’re approved, it takes 24 hours to fund your credit line.
BlueVine has loaned out over $2 billion in business funds since they were founded in 2013, predominantly lending to small businesses. Their APR interest rates start at 4.8% and there are no monthly fees of any kind.
To get a BLOC with BlueVine, you’ll need a 600+ FICO score and at least 6 months of business operations with $100,000 in revenue.
You’ll have an approval or rejection in about five minutes. If you opt to pay for a $15 wire transaction, your funds will be available within a few hours.
One drawback is that BlueVine’s credit lines max out at $250,000.
Fundbox is a US-based financial firm that offers lines of credit up to $100,000. Your credit line can be approved in about three minutes and will be ready for spending the following day. You can apply online and you don’t need to give your credit score.
You’ll be more likely to be approved if you already have a business checking account with at least two months of transactions and $50,000 in revenue.
One drawback of Fundbox is that you’ll need to pay a weekly fee as you repay what you’ve borrowed.
Lendio is an online bank headquartered in Utah. They’ve supplied small businesses with $1.4 billion since 2011. Lendio helps small businesses globally, donating to low-income businesses for every BLOC they issue.
Business lines of credit at Lendio start at $1,000 and max out at $500,000. You can have access to your funds almost instantly via apps or your browser.
Minimum requirements for a Lendio BLOC are: 1 year of business ownership, credit score of 600+, and annual revenues of at least $100,000.
One drawback is that Lendio’s lowest interest rate is 13.99% APR.
OnDeck is an online lender that specializes in getting working capital to small businesses. They’ve loaned $3 billion dollars since their inception in 2007.
OnDeck’s business lines of credit start at $6,000 and max out at $100,000. Their interest rates start at 13.99% APR. Once you’re approved you get your funds instantly via their portal.
To apply, you’ll need to provide your business tax ID and three months of business banking statements.
One drawback is that OnDeck charges an origination fee. However, if you withdraw $5,000 within 5 days, the fee is waived.
StreetShares, an online banking platform, was founded in 2013 by two military veterans. They’ve funded over $100,000,000 for American small businesses.
BLOCs from StreetShares are funded starting at $5,000 and going up to $250,000. You can apply online or over the phone.
StreetShares requires a minimum FICO credit score of 700. To apply, you’ll need to provide monthly bank statements and tax returns. They don’t require an application fee.
One drawback of StreetShares is they don’t provide a mobile app to manage your funds.
Wells Fargo has been in banking since 1852, headquartered in San Francisco. They rake in $24 billion in net income per year so you know you’re dealing with a stable company.
Wells Fargo offers business lines of credit that are free of fees for the first year. BLOCs have APR rates starting at 7.00%. Better terms can be found for businesses with over $2 million in sales annually.
Wells Fargo doesn’t make any claims about how quickly your line of credit will be approved or how soon you can access your funding.
Bank of America
Bank of America’s history goes back 240 years and they boast 66 million clients in 35 countries. Their unsecured business lines of credit run from $10,000 to $100,000 with interest rates starting at 7.00%.
To qualify for a BLOC you’ll need a FICO credit score of 670+, two years of business ownership, and $100,000 in revenue. You’ll also need to pass a phone interview.
You can access your credit line in about 10 days after approval.
One drawback is that Bank of America charges a $50 origination fee for setting up your BLOC.
Chase Bank, headquartered in New York City, has been around since 1877 and they claim assets of $2.49 trillion.
Chase offers business lines of credit up to half a million dollars. You have to pay an annual fee but it’s waived if you average using 40% or more of you credit.
You can pick the date you pay your monthly installments. Unfortunately, Chase doesn’t make public its APY interest rates or qualification requirements. You need to go to a brick-and-mortar branch to apply.
One drawback is that Chase BLOCs terminate after five years, at which point you’ll have to reapply.
What Are the Alternatives to a Business Line of Credit?
Traditional forms of financing for small businesses include; invoice factoring, merchant cash advances, loans, and credit cards. Additionally, crowdfunding and specialized grants are worth looking into.