What is a business line of credit?

A business line of credit, sometimes called a commercial line of credit, like a small business loan is a flexible way to cover business expenses like working capital, bills, inventory, or any other business needs. Unlike a business loan, where you receive a lump-sum disbursement upon account opening, small business lines of credit provide as-needed access to financing through a revolving line, similar to a credit card. Monthly payments are made on what you borrow.

How does a business line of credit work?

A small business line of credit is similar to a credit card, but interest rates are usually lower and the funds must be used for business purposes. Like a credit card, you can borrow up to your approved credit limit and are only charged interest on what you borrow. There is a minimum repayment each month. Once you repay the borrowed funds, you can continue to draw on the line up to your approved credit limit. A small business line of credit is subject to annual credit review.

What can a business line of credit be used for?

Once you open your line of credit, you can use the money for almost any business expense. Most business lines of credit are used for short-term needs such as buying inventory, managing cash flow, or covering payroll. There is a minimum repayment plus interest every month, just as a credit card company would charge.

What's the difference between secured and unsecured lines of credit?

A secured line of credit uses an asset you already have, like company real estate, as collateral to secure the loan. If you default on payments, the lender has the right to seize that piece of collateral to offset their losses. In general, a secured line of credit puts the lender at less risk, but can result in higher approval rates or more favorable terms for you, such as lower interest rates. With an unsecured line of credit, the lender takes more risk. If you default, there is no collateral to recoup the losses. Since this puts the lender at greater risk, an unsecured line of credit may be more challenging to obtain and carry higher interest rates.

What's required to obtain a small business line of credit?

To obtain a business line of credit, lenders are going to evaluate your business financials, including your business credit score, monthly (or yearly) revenue, and your time in business. Most lenders will want to see a minimum credit score of 600, annual revenues of $50,000 or more, and at least six months of business history. However, individual lender requirements may vary, so it is beneficial to shop your options.

Can I get a business line of credit to start a business?

It’s uncommon. Lenders generally prefer at least two years of operation and steady revenue before approving a business line of credit.

How fast can you get a business line of credit?

It varies by lender and their underwriting processes, with some applicants getting approved and receiving funds in less than a week, and others waiting for up to a month.

Can I get a business credit line increase?

You can ask for a credit line increase after the account has been open for at least a few months. However, you may not be approved if any payments have been late.

Can I get a business line of credit with bad credit?

Most lenders are wary of an applicant with bad credit because they fear you won’t be able to pay back any capital. However, if you have been in business for several years and can show consistent revenue, you could qualify.

Business Line of Credit

Name: SoFi Business Line of Credit
Brand: SoFi

SoFi Small Business Loans are originated by SoFi Bank, N.A.  

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To be approved, a borrower’s home address and primary business operating address must be in the U.S. or U.S. territories, and you must meet SoFi’s underwriting requirements in SoFi’s sole and absolute discretion. Not all borrowers receive the lowest rate. Lowest rates are reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your business and personal creditworthiness, business revenue, and other factors. Rates and terms are subject to change at any time without notice. SoFi Small Business Loans may not be used for personal, family or household purposes. See SoFi.com/legal and SoFi.com/eligibility for more details. 

Loan amounts range from $2,500-$250,000. The annual percentage rate (APR) is the cost of credit as a yearly rate and reflects your interest rate.

SoFi Bank, N.A., NMLS #696891. Member FDIC

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