How Much Can You Borrow With A Business Line Of Credit?

Krongkaew/Getty Images: Illustration by Issiah Davis/Bankrate

A business line of credit is typically a revolving form of debt that, unlike a term loan, allows you to withdraw from the credit line repeatedly. You can take out funds up to a certain limit as needed. Then, you can pay down the debt and borrow more later if you’re still in the draw period.

Lenders set their maximum limits, but many credit lines only allow you to borrow amounts up to $500,000. The line of credit amount you’re approved for will vary depending on your business’s size, years in business, financial stability, credit score and other risk factors.

Read on to learn more about how to get a line of credit and how much you can borrow with a business line of credit.

How big of a business line of credit do you qualify for?

Most business lines of credit fall somewhere between $5,000 to $500,000, though some lenders offer higher limits up to $5 million. Like a term loan or credit card, lenders will evaluate whether you are low or high risk before they decide how much money to make available to you. Even though you may never use your full line of credit, your lender will want to make sure you can pay it back if you do.

Business lines of credit may also be secured or unsecured. Secured loans require collateral to back the business loan, while unsecured lines of credit don’t. You may be able to get a higher amount if you offer more collateral.

Lenders want signs your business is stable and profitable and thus unlikely to default. Most set minimum requirements for revenue, credit score and time in business. Businesses with higher credit scores and revenues are more likely to be approved for a larger line of credit amount.

Business line of credit by lender 

If you’re looking for a business line of credit with high credit limits, you’ll need to research your lenders. Credit limits vary widely depending on the lender you choose. Many bank lenders offer high line of credit amounts, but you’ll need strong credit and time in business to qualify. For example, Wells Fargo offers a secured business line of credit that can go up to $1 million. Bank of America lines of credit begin at $1,000 but have no set-in-stone ceiling.

Meanwhile, online lenders often cap their line of credit amounts at $250,000 to $500,000, though they’re more likely to accept startups or businesses with poor credit. That said, if you need higher credit limits, you can find them with certain lenders. Examples of line of credit amounts with online lenders:

How to increase your business line of credit limit

Some lenders will allow you to increase your existing business line of credit limit. To increase your credit limit:

1. Request the credit line increase: Use your online portal to request an increase or call the lender.
2. Provide documentation: The lender may want to see additional documentation showing your financial status, such as increased revenue.
3. Wait for approval: The entire process for approval can take several weeks, giving the lender time to review your account.

Whether or not you’re eligible for an increase will depend on a few factors. First, have you met the requirements in your original contract? Many lenders require you to meet certain benchmarks or comply with rules regarding owner compensation and business liquidity. Meeting these benchmarks may increase your chances of successfully increasing your available credit.

You may also help your chances of a credit line increase by:

• Establishing a positive repayment history with the lender, proving you can manage a line of credit well
• Proving an increased cash flow
• Proving an increased annual income
• Offering additional collateral against the line of credit

Alternatives to a business line of credit

While a business line of credit is a suitable working capital financing option, it may not be ideal for all. If you can’t increase your line of credit or you’re looking for lower rates or longer repayment terms, these alternatives might be your best options:

• Business credit cards: Designed for smaller business expenses, credit cards offer easy management of business purchases while providing perks such as cash back and rewards. They can also help you build business credit.
• Term loans: Businesses needing capital for larger, one-time investments may find term loans a suitable option. They provide a lump sum with fixed repayment terms, offering more predictability.
• SBA loans: SBA loans offer long-term financing with higher loan amounts, lower interest rates and more lenient terms, especially for startups and small businesses. These loans are backed by the U.S. Small Business Administration.
• Grants: These funds do not have to be repaid, allowing businesses to secure capital from various sources without taking on debt or assuming any other risks of small business financing.

The bottom line

While lenders offer lines of credit as high as $5 million, most small businesses won’t qualify for such high limits. Your approved amount will depend on you and your business’s qualifications. You may get better terms by offering ample collateral and coming to the table with personal and business credit scores in the good to excellent range.

Frequently asked questions

• What is a typical business line of credit amount?
  

  A typical business line of credit ranges from $5,000 to $500,000, but the amount a business is approved for varies based on its financial history and creditworthiness.

• Can you get multiple business lines of credit?
  

  Yes, as long as the business meets the eligibility requirements, it can have more than one line of credit from different lenders. Lenders do assess your current debt obligations when approving you for additional lines of credit.

• Is it hard to get a business line of credit?
  

  Business lines of credit tend to have more lenient qualifications for eligibility than other business loans, especially if you’re applying with an online lender. But if you don’t meet the qualifications for revenue, credit score and time in business, you will struggle to get approved for the line of credit.