Business Line of Credit

The difference between a business line of credit and a business term loan is that a business term loan offers an upfront lump sum of money, while a line of credit gives you access to a set credit limit that you can draw from.

Business line of credit. A small business line of credit can offer ongoing access to funds. If you’re approved, you’ll be able to draw funds up to a certain credit limit. You’ll only pay interest on the amount you borrow. As you repay, the funds become available to borrow again. This makes a line of credit ideal for managing cash flow and other ongoing business needs.

Business term loan. A business term loan provides an upfront lump sum of cash. If approved, the funds will be deposited into your business bank account and you’ll pay interest on the entire sum. Short-term business loans can be useful when covering large, one-time business expenses such as purchasing equipment or real estate.

The main difference is that a secured business line of credit requires collateral — an asset the lender can claim if the borrower defaults. This usually results in lower interest rates and higher credit limits, but also increases risk to the borrower. Common forms of collateral include equipment, inventory or property.

An unsecured business line of credit, on the other hand, doesn’t require collateral. Instead, lenders evaluate the business’s creditworthiness, cash flow and financial history. These lines typically come with higher interest rates, lower credit limits and may require a personal guarantee, but they offer access to financing without putting business assets at risk.

OnDeck offers unsecured lines of credit, so your business can access funds without pledging collateral.

The best line of credit for your business depends on your business needs. For some businesses, the amount they can borrow is the most important factor. For others, it may be things like interest rates, speed of funding or likelihood of credit approval.

When searching for a line of credit for your business, you should review the loan terms. Look at things like interest rates, repayment schedules, credit limits and fees such as origination fees or early repayment fees. This can help you ensure that the line of credit you choose is a good fit for your business.

At OnDeck we offer fast, flexible business funding with transparent pricing. Our application process is easy and, once approved, you could get your funds as soon as the same business day.^† Plus, our loan comparison tool gives you a comprehensive breakdown of your cost of capital so you can evaluate all your options.

The benefits of a business line of credit include flexibility, on-going access to funds and the ability to better manage your cash flow.

Flexibility. Lines of credit are flexible borrowing options — allowing you to borrow what you need, when you need it.^◊

Access to funds. A line of credit can give you working capital on demand — to manage day-to-day operations, cover unexpected needs or take advantage of business opportunities — even after regular business banking hours.

Cost-effective. Unlike a term loan where you pay interest on the entire lump sum, a line of credit typically has you pay fees or interest on the amount that you draw — allowing you to control costs.

Better cash flow management. With a line of credit, you can smooth cash flow gaps and ensure your business has the funds it needs to stay on track while investing in growth.

The amount of business credit you can get depends on several factors, including your business’s financial situation, creditworthiness and the lender’s eligibility requirements. Typically, strong business finances and a good credit score will allow you to access higher credit limits and better terms such as a lower interest rate.

An OnDeck Line of Credit offers qualified borrowers credit limits up to $200,000. Applying is easy and only takes a few minutes. Plus, OnDeck only conducts a soft credit check, so it won’t affect your score.

When you take a draw from a business credit line, you’ll generally have a set time period to repay the funds. You make weekly or monthly payments on the amount that you’ve borrowed to pay it off by the end of the term.

With an OnDeck Line of Credit, you’ll receive your repayment terms upfront. When you take a draw, you’ll only pay interest on the amount you borrow and the funds will be repaid in an easy weekly or monthly payment. We don’t charge any annual fees, monthly fees or draw fees. Additionally, you can repay early to bring down the cost of borrowing, with no prepayment penalty.

Instant Funding from OnDeck is a fast and easy way for small business owners to access up to $10,000 in working capital to run their business. Draw from your line of credit when you need it and see the funds in your account in seconds, 24/7, even when the banks are closed.^*

To increase your business line of credit, start by contacting your lender either online or by phone. Most lenders will want to understand how your business is doing and why you need a higher limit. Here’s how to prepare:

• Gather any financial documents you may need such as bank statements or tax returns.
• Prepare your case for why a higher credit limit would support business growth.
• Be sure that your financial situation is solid — lenders are more likely to approve those with a good credit score and a history of on-time payments.
• If you’re approved, be sure to review all of the updated terms and conditions.

With OnDeck, credit limit increases are determined by your cash flow, net income, and payment history. While OnDeck doesn’t accept applications for credit line increases, accounts are regularly reviewed to identify customers who may qualify for a higher limit.

The cost of a line of credit will vary between providers, but interest rates, fees and how you use it all play a role. You’ll typically only pay interest on the amount you borrow, not the full credit limit, which gives you more control. Traditional lenders, like banks, may offer lower interest rates but can be harder to qualify for.

Rates can vary widely depending on the lender — anywhere from around 7% to 60+% APR.^§ Fees will also depend on the lender with some charging origination fees, maintenance fees or draw fees. Before you borrow, be sure to read all of the terms to be sure you understand the cost of your line of credit.

Estimate your potential costs with OnDeck’s Business Loan Calculator to see projected repayment terms.

Getting any type of small business financing without a credit check is rare. Most business lenders will perform some type of credit check during their underwriting process. They may check your personal credit score, the business credit score or sometimes both. However, there are lenders that perform a soft credit check and focus more on other factors such as time in business and annual or monthly revenue.

OnDeck uses soft pulls that don’t affect your credit score — no hard inquiries.

If your lender reports to the business credit bureaus, then business loans, including business lines of credit, can help you build your business credit history. Make sure that you take all the steps necessary to open your business credit file. Keep an eye on your credit utilization and ensure that you make your payments on time. Doing so will help you build a strong credit profile, which can potentially boost your business credit score.

OnDeck reports your payments to business credit bureaus, so every time you pay on time, you’re building business credit history.

You may have a project that could benefit from funds beyond the capabilities of your small business line of credit or other credit products. Other types of business loans include:

Term loans. Term loans offer an upfront lump sum of cash that you can pay back over time. They can be useful for big one-time expenses.

Equipment loans. Equipment loans are a type of loan designed specifically for businesses looking to purchase equipment. Often, the equipment acts as collateral for the loan.

SBA loans. SBA loans are loans secured by the Small Business Administration. They can be difficult to get approved for and the process may take a long time.

Microloans. Microloans are business loans for a smaller amount — typically under $50,000. They can be easier to get approved for because of their smaller size.

At OnDeck we understand business financing, and our term loans are available in addition to a business line of credit. Reach out to your dedicated loan advisor to explore some of your available financing options.

OnDeck uses soft pulls of personal credit reports that don’t affect your credit score.