Loans + Financing
Business line of credit: complete 2026 guide
When a line of credit beats a term loan, where to get one, and what banks actually look at.
Neil Brookes Updated 2026-06 6 min read
Why line of credit (LoC) beats a term loan for working capital
Term loans get the whole amount up front and charge interest from day 1. LoCs let you draw what you need, when you need it, and pay interest only on what's drawn. For uneven cash flow (seasonality, lumpy receivables, surprise opportunities), LoC is structurally better.
Typical 2026 terms
- Bank LoC: $25k-$500k, prime+2-6% APR, requires 2+ years in business + 600+ FICO
- Online LoC: $5k-$250k, 14-50% APR, 1 year in business + 580+ FICO
- SBA Express LoC: up to $500k, prime+4.5-6.5%, faster than SBA 7(a) (~30 days)
- Asset-based LoC: against AR/inventory, ~10-18% APR, no personal guarantee for larger lines
Top bank providers
- Live Oak Bank — strong for SBA Express LoC
- Bluevine — best online application speed
- Wells Fargo, Chase, US Bank — traditional bank LoCs for established businesses
- Pursuit Lending — CDFI option for under-served borrowers
What banks actually look at
- Personal credit (FICO 680+ for best rates)
- Time in business (2+ years for banks; 1+ for online)
- Annual revenue ($100k+ minimum, $500k+ for bank LoCs)
- Debt service coverage ratio (DSCR) > 1.25x
- Cash flow consistency over 12 months
NB
Neil Brookes
Founder, SMBs.com
Building SMBs.com — the free directory of every small business worldwide. Previously: founder + operator at FIH Inc, focused on small-business M&A advisory.