A business line of credit gives your business an approved limit that you can draw against whenever you need money, repay on a schedule, and then draw again. You pay interest or fees only on the amount you have drawn, never on the untouched part of the limit. To qualify, lenders look mainly at your revenue, how long you have been in business, your credit, and what your recent business bank statements show. Banks set the bar highest, while online and revenue-based lines accept newer businesses and lower scores in exchange for a higher price.
Lines are the financing small businesses ask for most. In the Federal Reserve's 2026 Small Business Credit Survey report on employer firms, 43% of firms that applied for a loan, line of credit or cash advance sought a business line of credit, more than any other product. Of those line of credit applicants, 45% were fully approved, 31% received only part of what they asked for, and 24% were turned down.
How does a business line of credit work?
A lender or funder reviews your business and sets a credit limit, for example $100,000. Nothing is paid out at that point. When a cost comes up, you draw some or all of the limit and the money lands in your business account, often the same day or the next. Each draw is repaid on a set schedule, and as you repay, that amount becomes available to draw again. This cycle is what makes a line revolving, with no new application for each draw.
The part you have not drawn usually costs nothing to carry. The U.S. Small Business Administration makes the same point on its page for SBA lenders, noting that with a line of credit, interest is charged only while the money is in use. A business with a $100,000 line and a $15,000 balance pays on $15,000.
Most lines run on two clocks. The draw period is how long the line stays open for new draws, which Bankrate's guide to business lines of credit puts at one to five years. The repayment term is how long you have to pay back each draw, typically six to 24 months according to the same guide. Many lines are also reviewed at renewal, when the lender may keep, raise or lower the limit.
Weekly or monthly payments on what you draw
Payments follow what you have drawn, and the size of the limit does not change them. Bank lines tend to bill monthly, while online and revenue-based lines more often collect weekly by automatic debit. As an illustration, if you draw $20,000 on a line that repays each draw over 26 weeks, roughly $770 a week goes toward that draw, plus the interest or fee on it. Draw another $10,000 before the first is cleared and about $385 a week is added.
Interest or a fee on each draw
Bank and SBA lines usually charge interest on the outstanding balance, so the cost shrinks as you pay down and stops at zero. Many online lines charge a fixed fee on each draw instead, often written as a factor rate. Bankrate gives the example of a $10,000 draw at a factor of 1.20, which means repaying $12,000, and says these factors usually fall between 1.10 and 1.50.
Secured vs unsecured business lines of credit
A secured line is backed by collateral such as receivables, inventory, equipment or cash on deposit. Because the lender has something to fall back on, secured lines tend to carry larger limits and lower rates, and Bankrate notes they can be easier to get with weaker credit or a short track record. The SBA's Working CAPLine is an asset-based example, where the business draws against its receivables and inventory and repays as those turn into cash. Because the lender has to keep monitoring that collateral, the SBA says it may charge additional fees.
An unsecured line has no specific asset pledged against it. The lender carries more risk, so Bankrate says unsecured lines typically call for a personal credit score in the mid-600s or above and higher annual revenue, and some lenders ask the owner to sign a personal guarantee. Lines built around revenue, like many of those placed through brokers, are usually unsecured and lean on your deposits more than your assets.
Bank lines vs online and revenue-based lines
The table below draws on NerdWallet's business line of credit guide and the SBA's program pages, and it describes the market as those sources report it.
| Bank or credit union line | SBA line | Online or revenue-based line | |
|---|---|---|---|
| Credit usually expected | Close to 700 or higher | Good credit and a clear ability to repay | From about 600 at some online lenders |
| Time in business | Several years is typical | Multiple years is typical | Some lenders accept six months |
| Limit | Higher, often set case by case | Up to $500,000 under SBA Express, up to $5 million under the 7(a) Working Capital Pilot | Lower maximums than banks |
| Speed | Days to weeks | Weeks, because of the paperwork | Often a few business days, sometimes the same day |
| Cost | Usually the lowest rates | Negotiated, capped at an SBA maximum | Higher, in exchange for speed and easier approval |
The SBA limits come from its 7(a) loan page and its lender page. In the Fed survey, applicants at large and small banks mostly picked their lender because of an existing relationship, while applicants at online lenders put speed and their chance of being funded first.
Line of credit vs loan: which one fits?
A term loan pays one lump sum that you repay in fixed installments, with interest on the whole amount from the first day. It suits a one-time purchase with a long useful life, and NerdWallet suggests a term loan when you are making a large investment or want to repay over a long period. A revenue-based advance also pays a lump sum, against a share of future sales, and is usually the fastest money to get as well as the most expensive. It fits one known need with a clear payoff, like stock for a busy season.
A line tends to beat both when the need keeps coming back or when you cannot predict when it will arrive:
- Your costs recur on a cycle, such as inventory restocks every few weeks, fuel for a fleet, or materials for each new job.
- Your cash flow is uneven, which is common. In the same Fed survey, 50% of employer firms said uneven cash flow, which the survey defines to include collecting on receivables, was a financial challenge in the prior 12 months.
- Your customers pay slowly. A contractor or carrier paid on 30 to 60 day terms can draw to cover Friday's payroll and repay when the invoice clears, paying only for the weeks the money was out.
- You want a cushion you may never touch. Among firms that applied for financing in the Fed survey, 42% wanted credit available for future use.
For a single purchase, compare the line against revenue-based financing for speed, equipment financing when the purchase is a machine or vehicle that can secure itself, and SBA and bank loans when you can wait several weeks for the lowest cost.
Business line of credit requirements
Every lender sets its own thresholds, and they vary widely. Published guides still give a useful picture of where the floor tends to sit. The figures below are what NerdWallet and Bankrate report about the market. They are not Today Capital Group's requirements, and the funders in our network each set their own.
| What lenders check | What published guides report | Source |
|---|---|---|
| Personal credit score | 600 or higher as a general minimum, close to 700 or higher for a bank or credit union line | NerdWallet |
| Credit for unsecured lines | Typically mid-600s or above, though some online lenders accept 500 | Bankrate |
| Time in business | Six months or more as a general minimum, and six months to two years on average across lenders | NerdWallet, Bankrate |
| Annual revenue | $50,000 or more as a general minimum, with many lenders setting $100,000 to $250,000 | NerdWallet, Bankrate |
Revenue usually sets the size of the limit, because the lender wants to know your deposits could carry the payment on a fully drawn line. Time in business shows staying power, since a company that has come through a full year has shown what its slow months look like.
Credit counts for more on a line than on an advance, since the lender is agreeing to fund future draws it has not seen yet. A higher score opens more lines and larger limits, and a lower score narrows the options without ending them.
What your bank statements show
For online and revenue-based lines, recent business bank statements do much of the work that tax returns do at a bank. An underwriter reads them for average monthly deposits, how steady those deposits are, the balance the account keeps through the month, overdrafts or returned items, and payments already going to other lenders. Our guide on how funders read your bank statements goes through each item in detail.
Costs to watch on a business line of credit
The rate alone does not tell you what a line costs. NerdWallet puts business line of credit rates anywhere from 10% to 99% APR, and Bankrate gives a typical range of 8% to more than 60%. Fees can matter as much as the rate:
- A draw fee is charged each time you take money, and Bankrate puts it at 1% to 4% of the draw, so a 3% fee on $20,000 costs $600 before any interest.
- An origination fee for opening the line typically runs 1% to 3%, according to Bankrate.
- Some lines charge maintenance, annual or inactivity fees just for staying open, which NerdWallet counts among the charges that raise total cost, so ask whether an unused line costs anything to carry.
Early payoff is where the two pricing models split. On a line that charges interest on the balance, paying a draw back sooner always saves money. On a fixed fee per draw, paying early saves nothing unless the program offers an early payoff discount. Take an illustrative $20,000 draw. At 24% annual interest, repaid in equal weekly amounts, it costs about $1,246 over 26 weeks and about $415 if you clear it in 8 weeks. At a 1.10 factor it costs $2,000 either way, and a program that waives half of the remaining fee at payoff brings the 8 week cost down to about $1,308. Bankrate notes that prepayment penalties are less common on lines than on other business loans, but the discount terms still deserve a close read.
Mistakes that make a line of credit expensive
- Using a line for a long-term purchase squeezes years of value into months of payments. Equipment you will use for seven years fits equipment financing better than six months of draws.
- Maxing out the line and leaving it there turns it into a costly loan with no cushion behind it, and a line that stays fully drawn can count against you at renewal.
- Drawing without a repayment source in sight is how a balance creeps up. A good draw has a clear way back, such as a specific invoice or a seasonal rush.
- Applying only once money is already tight means lenders see your weakest months, which is why we suggest owners set up funding before the busy season.
How to apply for a business line of credit through Today Capital Group
Today Capital Group is a funding broker, so it does not lend money itself. One application goes to the funders in our network, the offers come back side by side, and our team goes through them with you before anything is signed. Lines placed through us run up to $250,000, offers often arrive within a day, repayment is weekly or monthly on what you have drawn, and some programs discount early payoff. Our business line of credit page covers limits and repayment in more detail.
- Fill out the short funding application with your revenue, time in business and what the money is for.
- Add your last four months of business bank statements, either by uploading them or by connecting your bank with read-only access.
- Review the offers with our team, compare draw costs, payment frequency and early payoff terms, and choose one or decline them all.
There is nothing to pay to apply or to see offers, and no obligation to take one. If your file fits a different product better, the offers will show that too. To see each stage from submission to money in your account, read what happens between application and funding.
If you would rather talk first, call us at (818) 351-0225 or send our team a message, and someone will go through what a line could look like for your business.
Questions about business lines of credit
How does a business line of credit work?
A lender sets a limit, you draw what you need up to it, and you repay each draw on a weekly or monthly schedule. Repaid amounts become available again, and you pay interest or fees only on what you have drawn.
What do you need to qualify for a business line of credit?
Lenders look at revenue, time in business, personal credit and recent bank statements. NerdWallet describes a general minimum of a 600 credit score, six months in business and $50,000 in annual revenue, with banks usually asking for more, though every lender sets its own thresholds.
What is the difference between a line of credit and a loan?
A loan pays one lump sum repaid in fixed installments, with interest on the full amount from the start. A line lets you draw only what you need, when you need it, which suits recurring or unpredictable costs better than one large purchase.
Is a business line of credit secured or unsecured?
It can be either. Secured lines are backed by assets such as receivables or cash and usually offer larger limits and lower rates, while unsecured lines need no specific collateral but typically ask for stronger credit and revenue.
Does applying for a line of credit hurt my credit score?
Applying through Today Capital Group does not involve a hard credit pull. Most funders prequalify from bank statements and a soft pull, which does not affect your score, and if a funder needs a hard pull in final underwriting, you are told first.
How much does a business line of credit cost?
It depends on the lender and your file. NerdWallet reports rates from 10% to 99% APR, and draw, origination and maintenance fees can add to that, so compare the total cost of a sample draw on each offer.
