To get a business line of credit, apply to a bank, credit union, or online lender with your business and personal identification, recent bank statements, and proof of revenue; the lender reviews your credit, time in business, and cash flow, then sets a credit limit you can draw from as needed. A line of credit is revolving: you borrow up to an approved ceiling, pay interest only on the balance you actually use, and the limit refreshes as you repay. That makes it different from a term loan, where you receive a single lump sum and repay it on a fixed schedule. Most small businesses use a line of credit to smooth uneven cash flow, cover payroll or inventory between customer payments, or keep a reserve on hand for unexpected costs. Approvals through online lenders often take 24-48 hours; bank lines take longer but usually carry lower rates.
Key takeaways
- A business line of credit is revolving: you borrow up to an approved limit and pay interest only on the balance you actually use.
- Product minimums here start at $10,000 in available credit, with limits scaling to revenue and cash flow.
- Banks typically want a 680+ credit score and two-plus years in business; many online lenders accept FICO 500+ and shorter history.
- Online lenders commonly approve within 24-48 hours; bank lines take longer but usually cost less.
- Nearly all small-business lines require a personal guarantee from the owner; no legitimate lender calls approval "guaranteed."
- Watch total cost, not just the rate: draw fees, maintenance fees, and origination fees all affect what a line really costs.
- Clean bank statements, separated business finances, and lower credit utilization are among the fastest ways to improve approval odds.
How a business line of credit works
A business line of credit gives you a pre-approved borrowing limit that you can tap repeatedly. When you draw funds, interest begins accruing only on the drawn amount. As you repay principal, that capacity becomes available again, so a $50,000 line can fund far more than $50,000 of activity over a year if you keep cycling it.
Lines fall into two broad types. A secured line is backed by collateral such as accounts receivable, inventory, or equipment, which usually means a higher limit and lower rate. An unsecured line requires no specific collateral but typically comes with a smaller limit, a higher rate, and almost always a personal guarantee from the owner.
Lines also differ by where they come from. Traditional bank and credit-union lines offer the lowest pricing but the strictest requirements and slowest decisions. Online and fintech lenders decide faster, often connect directly to your bank data, and accept weaker credit profiles in exchange for higher rates and shorter draw terms.
| Feature | Line of credit | Term loan |
|---|---|---|
| Structure | Revolving; draw as needed | Lump sum up front |
| Interest charged on | Outstanding balance only | Full loan amount |
| Best for | Ongoing, variable cash needs | One-time, defined purchase |
| Repayment | Flexible as you repay/redraw | Fixed installments |
| Reusable | Yes, up to the limit | No |
Requirements to qualify
Lenders weigh four factors above all: personal and business credit, time in business, revenue, and cash flow shown in your bank statements. Requirements vary widely by lender type, and a weakness in one area can often be offset by strength in another (for example, strong monthly revenue can offset a lower credit score).
General ranges most small businesses will encounter:
- Credit score: Banks typically want 680+. Many online lenders work with scores of 500+, pricing the added risk into the rate.
- Time in business: Banks often want two or more years. Online lenders may approve at six months to one year.
- Annual revenue: Commonly $100,000 or more per year, though thresholds vary. Product minimums here start at $10,000 in available credit.
- Cash flow: Consistent deposits and few negative-balance days matter more than a single big month.
| Profile (for example) | Likely fit | Trade-off |
|---|---|---|
| 720 credit, 3 yrs, $500K revenue | Bank or credit-union line | Lowest rate, slower approval |
| 650 credit, 1.5 yrs, $250K revenue | Online lender line | Faster, moderate rate |
| 540 credit, 9 mos, $150K revenue | Short-term online line | Higher rate, smaller limit |
Nearly all small-business lines require a personal guarantee, meaning the owner is personally responsible if the business cannot repay. No legitimate lender should describe approval as "guaranteed" for the borrower.
Documents you'll need to apply
Having your paperwork ready before you apply shortens the decision and reduces back-and-forth. Online lenders increasingly pull much of this automatically through a secure bank connection, but you should still have the following prepared:
- Government-issued ID for each owner with 20%+ ownership
- Business formation documents (articles of incorporation or organization) and EIN
- Three to twelve months of business bank statements
- Recent business tax returns (banks often want two years)
- A profit-and-loss statement and balance sheet, especially for larger bank lines
- A voided business check or bank details for funding and payments
For secured lines, expect to also document the collateral, such as an accounts-receivable aging report or an inventory list. Keeping business and personal finances in separate accounts makes underwriting cleaner and helps you build a business credit profile over time.
Step-by-step: how to apply
The process is similar across lenders, though timelines differ. A typical path:
- Clarify the need. Estimate how much working capital you draw on in a given cycle and how often. This shapes the limit you request and whether a line even fits better than a term loan.
- Check your credit. Review both personal and business credit reports and correct errors before lenders see them.
- Gather documents. Assemble the paperwork above so you can respond to requests within hours, not days.
- Compare lender types. Match your profile to the right lane, bank for lowest cost, online for speed and flexibility.
- Submit the application. Provide identification, revenue, and bank data. Many online applications take under 15 minutes.
- Review the offer. Confirm the limit, rate, draw and repayment terms, and every fee before accepting.
- Draw funds. Once approved, transfer only what you need and keep the rest in reserve.
Online decisions frequently land within 24-48 hours; bank lines can take one to several weeks because of manual underwriting.
Costs, rates, and fees to expect
The headline rate is only part of the cost. Read the full fee schedule, because a line with a low advertised rate can cost more once draw and maintenance fees are added.
Common charges include:
- Interest: Charged only on the drawn balance, expressed as an APR or a factor. Bank lines are generally the cheapest; online lines cost more.
- Draw fee: A small percentage charged each time you pull funds, common with online lenders.
- Maintenance or annual fee: A flat charge to keep the line open.
- Origination fee: A one-time setup cost on some lines.
| Cost item (for example) | Bank line | Online line |
|---|---|---|
| Interest on drawn balance | Lower | Higher |
| Draw fee per advance | Rare | Around 1-3% |
| Annual/maintenance fee | Possible flat fee | Possible flat fee |
| Speed to fund | Slower | Faster |
Figures above are illustrative ranges for comparison, not quotes. Always ask for the total cost of a representative draw over a full repayment cycle so you can compare offers on equal terms.
Ways to improve your approval odds
If your first look at the requirements shows gaps, several steps can strengthen an application, sometimes within a few months:
- Keep clean bank statements. Avoid overdrafts and maintain steady deposits; lenders read cash flow closely.
- Separate business and personal finances. A dedicated business account and, over time, a business credit profile build credibility.
- Lower personal credit utilization. Paying down revolving balances can lift your score before you apply.
- Apply for a realistic limit. Requesting a line proportional to revenue is easier to approve than an oversized one.
- Consider a secured line. Offering receivables or inventory as collateral can unlock approval or a better rate when credit is thin.
- Start smaller, then grow. Responsibly using and repaying a modest line builds a track record for a larger limit later.
Match the lender to your profile rather than applying broadly. Targeted applications reduce unnecessary credit inquiries and improve your odds of a workable offer.
Frequently asked questions
What credit score do I need for a business line of credit?
It depends on the lender. Banks and credit unions generally look for a personal score of 680 or higher for their best rates. Many online lenders work with scores as low as 500, offsetting the added risk with a higher rate and often a smaller limit. Strong revenue and steady cash flow can help offset a lower score.
How long does it take to get approved?
Online lenders often decide within 24 to 48 hours and can fund shortly after, because they pull much of your data digitally. Traditional bank lines involve manual underwriting and can take one to several weeks. Having your documents ready before you apply speeds up any lender's decision.
How is a line of credit different from a business loan?
A term loan gives you one lump sum that you repay on a fixed schedule, and interest is charged on the full amount. A line of credit is revolving: you draw only what you need up to an approved limit, pay interest only on the outstanding balance, and reuse the limit as you repay. Lines suit ongoing, variable cash needs; term loans suit one-time purchases.
What documents do I need to apply?
Typically government ID for each major owner, business formation documents and an EIN, three to twelve months of business bank statements, recent tax returns, and often a profit-and-loss statement and balance sheet. Secured lines also require documentation of the collateral, such as an accounts-receivable aging report or inventory list.
Do I have to sign a personal guarantee?
Almost always, yes. Most small-business lines require the owner to personally guarantee repayment, meaning you are responsible if the business cannot pay. This is standard, but you should read the guarantee terms carefully. Be cautious of any lender promising a "guaranteed" approval, which is not a legitimate claim in small-business lending.
How much can I get with a business line of credit?
Limits are tied to your revenue, credit, and cash flow. Available credit commonly starts around a $10,000 minimum and scales up with business size; established borrowers with strong financials can qualify for much larger lines. Requesting a limit proportional to your revenue improves approval odds compared with asking for an oversized line.
