How to Get a Business Line of Credit

How a line of credit works

You are approved for a maximum amount. You draw what you need, pay costs on the amount drawn, and as you repay, the available credit returns.

Unlike a term loan, you do not receive the whole amount upfront. That makes a line useful for costs that come and go: inventory, payroll gaps, repairs and short-term opportunities. Terms differ on repayment schedule, draw fees and renewal.

Read understanding business lines of credit and how interest works for the mechanics.

What lenders look at

Funders review time in business, monthly revenue, personal credit, bank balances, existing debt and industry.

• Revenue and deposits. Consistent deposits matter more than a single great month.
• Credit. Higher scores generally mean larger limits and lower costs.
• Cash balances. Frequent negative balances are a warning sign.
• Existing obligations. Other loans reduce your capacity.

For ROI Funder, the baseline is 500+ FICO, 6+ months in business and $20,000+ in monthly revenue. See requirements to qualify for a business line of credit.

Documents to prepare

Have a completed application and recent business bank statements ready. Banks may also ask for tax returns and financial statements.

With ROI Funder, a complete file is the application plus three months of business bank statements. Banks usually add business and personal tax returns, a profit and loss statement and a balance sheet. Having them together before applying cuts days from the process.

Check that your bank statements are for the business account, not a mix of personal and business activity. See separating business and personal finances.

Compare the real cost

Compare draw fees, interest or fee structure, maintenance charges, renewal fees and how repayment is scheduled. The limit alone says little.

Lines can charge a fee per draw, a fixed fee on the amount drawn, interest, or a periodic maintenance fee. Convert each to total dollars for the amounts and time you expect to use.

Illustrative example: you draw $20,000 for 60 days. If the cost is a 3 percent fee per month on the balance, that is about $1,200 for two months. Does the inventory or job you funded earn more than that? See business line of credit fees and interest rates.

Use the line without overborrowing

Draw for specific purposes with a clear repayment source, and repay quickly. A line is a tool for timing gaps, not permanent funding.

1. Name the purpose of each draw.
2. Identify the payment source, such as an invoice or a sales period.
3. Repay as soon as that cash arrives.
4. Avoid using the line to cover ongoing losses.

If you are carrying a balance month after month, a term loan might be cheaper and more predictable. Our guide on managing a business line of credit offers more tips.

Apply with ROI Funder

ROI Funder places lines of credit that can be drawn, repaid and redrawn, typically in 24 to 72 hours once the file is complete.

Apply online in a few minutes with a soft credit pull and no obligation to accept an offer. ROI Funder matches your file to the funders in its network that fit and shows true cost, payback period and monthly-equivalent payments before you decide. Funding ranges from $5,000 to $5,000,000 in all 50 states.

Learn more on the business line of credit page, or compare with a term loan.

Before you apply, decide the limit you actually need. A line far larger than your needs invites overuse, and one that is too small forces you back to the application process. Look at your biggest recurring gap, add a modest cushion, and request that amount.