Best Business Lines of Credit for New Businesses in June 2024

Business lines of credit are harder to find for new businesses, but it’s not impossible. Check out these top picks.

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By Tara Mastroeni | Edited by Abigail Bassett and Janet Schaaf | May 29, 2024

Business lines of credit at a glance

Fundbox: Best line of credit for owners with lower credit scores

Loan amounts$150,000
Starting interest rate4.66%
Term length (months)3 or 6 months
Minimum credit score600
Minimum time in business6 months
ProsCons

 Shortest time-in-business requirement

 Low starting interest rate

 Low minimum credit score requirement

 Lower funding cap

 Shorter loan terms

 Only available to businesses based in the U.S.

OnDeck: Best business line of credit for same-day funding

Loan amounts$6,000 to $100,000
Starting interest rate35.90%*
Term length (months)12, 18 or 24 months
Minimum credit score625
Minimum time in business12 months
*This rate reflects the estimated starting APR offered to at least 5% of OnDeck customers. It doesn’t reflect the minimum APR offered by the company.

ProsCons

 Same-day funding available

 Lower annual revenue requirement

 Lower minimum credit score requirement

 Low funding cap ($100,000)

 Doesn’t disclose starting interest rate

 Requires a business bank account

American Express: Best business line of credit for for short-term funding

Loan amounts$2,000 to $250,000
Starting interest rate

  • 3% for 6-month lines of credit

  • 6% for 12-month lines of credit

  • 9% for 18-month lines of credit

Term length (months)6, 12, 18 or 24 months
Minimum credit score660
Minimum time in business12 months
ProsCons

 Fast application process

 No prepayment penalty

 Publishes full interest rate range

 Must link a business bank account for approval

 Requires personal guarantee

 Higher minimum credit score requirement

Small Business Administration: Best government-backed business line of credit

Loan amountsUp to $5,000,000
Starting interest ratePrime + 3.00%
Term length (months)Up to 120 months
Minimum credit score680 (Recommended)
Minimum time in business24 months (Recommended)
ProsCons

 Can choose between a term loan and line of credit

 Capped interest rates

 Borrowers who may not be approved by more traditional financing sources may qualify

 Could require a personal guarantee

 Collateral may also be required

 Funding times may be longer than you’d encounter with traditional lenders

Bank of America: Best secured business line of credit

Loan amountsFrom $1,000
Starting interest rateNot disclosed
Term length (months)12 months
Minimum credit scoreNot disclosed
Minimum time in business6 months
ProsCons

 Low annual revenue requirement

 Short time-in-business requirement

 Likely easier to qualify for than other business lines of credit

 Requires a cash deposit to open

 Doesn’t disclose all qualifying requirements

 Available funding may be limited

Lendio: Best business line of credit for low-revenue businesses

Loan amounts$1,000 to $250,000
Starting interest rate8.00%
Term length (months)6 to 18 months
Minimum credit score600
Minimum time in business6 months
ProsCons

 Low minimum credit score requirement

 Low annual revenue requirement

 High funding cap

 Potentially exorbitant interest rates

 Shorter repayment terms

 Funding may take a few days

What is a business line of credit for new businesses?

A business line of credit is a flexible form of small business funding. Unlike a term loan, which disburses the money in one lump-sum payment, a business line of credit typically works more like a credit card.

You can use it to borrow money up to a certain limit. You’ll only pay interest on the amount that you’ve borrowed, and you can borrow against your limit again once you’ve paid down your balance.

Typically, most financial institutions require you to be in business for at least two years before extending you a line of credit. However, our picks for best business line of credit for new businesses have shorter time in business requirements.

Types of business line of credit for new businesses

There are two types of business lines of credit that you may want to consider as a newer business owner.

  • Secured lines of credit: Secured lines of credit are backed by collateral. Since the lender has an asset that they can repossess if you default on the loan, these lines of credit are often easier to qualify for than their unsecured counterparts.
  • Unsecured lines of credit: In contrast, unsecured lines of credit are not backed by a form of collateral. Since they are often seen as riskier for the lender, you’ll often need a better credit score to qualify. You may also be subject to higher interest rates.

How to get a business line of credit for a new business

Here’s a closer look at how to get a business line of credit:

1. Determine why you’re borrowing and how much you’ll need

Determining why you need the loan and how much you’d like to borrow will be essential in helping you find the right lender. Some lenders have strict rules on how funding can be used, so be sure to check their restrictions.

If you’re unsure how much you’ll need to borrow, our business loan calculator can help you get an estimate.

2. Evaluate eligibility criteria

Checking your credit score can go a long way toward helping you figure out where to apply for a loan. If your score needs some work, consider working to build your credit score before applying or looking for lenders who accommodate lower scores.

Traditionally, online lenders offer more flexible qualifying requirements than brick-and-mortar financial institutions. However, in exchange you may end up with less flexible terms or a higher interest rate.

Similarly, secured lines of credit may also be easier to qualify for, but you’ll have to use an asset, such as inventory or a cash deposit, to back the loan.

3. Research appropriate lenders

Once you know what’s within your reach, the next step is to research lenders who may be a good match for your needs.

In particular, you’ll want to pay close attention to the term and whether it’s for a fixed amount of time, such as six or 12 months, or if it renews annually. You’ll also want to check in on the minimum payment amount that you’ll be required to make each month.

If you’re a new business, however, you’ll need to make sure you meet the lender’s eligibility guidelines to get a line of credit. It may also help to read some business lender reviews before moving forward with your application.

4. Gather your supporting documentation

Each lender’s required documents will vary. But, in general you should expect to provide a business plan, current financial statements, and business tax returns. In some cases, you may also need to connect to a business bank account.

5. Apply for the line of credit

These days, many business lines of credit applications can be completed online, but in some instances, you may need to visit a brick-and-mortar location in order to apply.

Decision time and funding timelines can also vary, but the lender will likely make these details clear so that you have a better idea of what to expect.

How to compare business lines of credit for new businesses

It’s a good idea to shop around when looking for a business line of credit for a new business. Doing so can help ensure that you find a financial product that you can afford, as well as one that suits your needs. Here’s what you should compare while shopping.

Rates: Business loan interest rates can vary by lender and are typically based largely on your creditworthiness. It’s worth noting that sometimes, lenders will charge a factor rate instead of simple interest.

Added fees: Be sure to ask each lender about the fees they charge. Business lines of credit often come with draw fees, annual fees or monthly maintenance fees, which can add up over time.

Repayment terms: Repayment can happen on a monthly or weekly basis for a business line of credit. Take the time to make sure you can afford to make the repayments on time to avoid default.

Credit limit: Credit limits can also vary by lender. Do your best to choose a lender who offers enough funding to meet your needs.

Funding time: Some lenders are able to deposit funds into your account the very same day your application is approved. Others may require a few days.

Pros and cons of business line of credit for new businesses

ProsCons

 Can withdraw money as needed

 Only pay interest on the amount that you borrow

 Typically has lower interest rates and higher borrowing limits than a credit card

 Not the best pick for financing large purchases or ongoing expenses

 May need to secure your financing with collateral

 Additional fees can elevate the cost of borrowing

Alternatives to business lines of credit for new businesses

If you decide that a business line of credit isn’t the right fit for your new business, don’t worry. There are other options, including:

  • Business credit cards: Business credit cards tend to have lower borrowing limits and higher interest rates than business lines of credit, but if you can afford to pay off your balance in full every month, you may be able to leverage rewards that you may not find with a line of credit.
  • Personal loans: If you have a decent personal credit score, you may be able to use a personal loan to fund your business’s needs. Just remember that you’ll be on the hook for repayment and that your personal financial profile will take a hit if you default.
  • Crowdfunding: Also known as peer-to-peer lending, crowdfunding involves receiving a personal loan from an individual investor rather than a financial institution. It can be easier to be approved for a loan with this model, but you’ll have to do your due diligence to ensure the lenders are trustworthy.

How we chose the best business line of credit for new businesses

We reviewed more than 15 lenders to determine the overall best six business lines of credit for new businesses. To make our list, lenders must meet the following criteria:

  • Minimum time in business of one year or less
  • Minimum credit score of 650 or lower
  • Rates and terms: We prioritize lenders with more competitive fixed rates, fewer fees and greater options for repayment terms, loan amounts and APR discounts.
  • Repayment experience: For starters, we consider each lender’s reputation and business practices. We also favor lenders that report to all major credit bureaus, offer reliable customer service and provide any unique perks to customers, like free wealth coaching.

Best business line of credit for new businesses summary

Frequently asked questions

Luckily, it is possible to get a business line of credit as a new business. All you need to do is research available lenders until you find one for which you meet or exceed the qualifying requirements. The list above can help you get started in your search.

Most banks require you to have at least a two-year business history before applying for a line of credit. However, some banks have more lenient qualifying requirements. For example, Fundbox only requires you to show six months in business.

The process for getting a business credit card as a startup often involves incorporating your business, obtaining an EIN number and applying for a card that suits your needs.