Business Line of Credit

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on December 13, 2022

A business line of credit is like an unsecured credit card businesses get from banks; they have a spending limit, which the bank decides, and they can spend up to that limit per month. The funds accumulate interest until paid off. Businesses often use lines of credit for short term funding.

Business Line of Credit Requirements

The requirements for a business line of credit are different from lender to lender. In general, most lenders require having been in business for at least 6 months, at least $25,000 in annual revenue, and a credit score of around 500. However, some traditional lenders may have steeper requirements.

How to Get a Business Line of Credit

To get a business line of credit, you must first compare your options and check their requirements. Once you find one you qualify for, you must gather certain financial documents, such as bank statements, financial statements, and some legal documents. Once you have your documentation and a willing lender, you can apply.

No Doc Business Line of Credit

A no doc business line of credit is like a line of credit offered by banks but it requires less paperwork. These lines of credit are offered by alternative lenders that operate differently from traditional banks. These lenders also tend to offer a number of other short-term financing solutions for small businesses.

Stated Income Business Line of Credit

A stated income business line of credit is a revolving credit line for which there is no income check requirement. These lines of credit offer businesses with limited income history an opportunity to receive businesses financing. These lines of credit often come with higher interest rates and a collateral requirement.

Business Line of Credit FAQs

What is a line of credit?

A line of credit is money lent to an individual or business. If a line of credit is revolving, then the line of credit will replenish as the borrower pays back money borrowed.

What does LOC stand for?

The acronym LOC stands for Line of Credit.

What is a revolving line of credit?

A revolving line of credit is one which replenishes when the loan is paid off. An example of this is a credit card. A non-revolving line of credit closes once the loan is paid off, such as a student loan.

What's the difference between a line of credit and a loan?

A loan is typically a lump sum whereas a line of credit is typically revolving which allows for the borrower to draw, repay, and again draw as needed.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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