Average business line of credit interest rates

A business line of credit can have an APR ranging from three percent all the way up to sixty percent or higher. According to the Small Business Lending Survey, average rates for new business lines of credit in Q4 2024 were between 6.47 percent to 7.06 percent for fixed-rate lines of credit and 7.39 percent to 7.92 percent for variable-rate lines of credit.

Lenders aren’t required to display their rates, making it difficult to pinpoint how much you’ll end up paying without applying first. What is known is that the best business lines of credit offer the lowest rates to established small business owners with good-to-excellent credit, while startups or those with bad credit will face higher interest rates and fees. Shopping around and comparing lenders is a highly effective method for finding the most affordable line of credit.

Current business line of credit rates

As with any financing, business lines of credit interest rates may vary between lenders and change based on market conditions. Here are current interest rates from some of the most popular business line of credit lenders.

Loan amounts

Loan amounts for business lines of credit can vary. While some lenders may offer maximum loan amounts in the millions of dollars, your credit score and time in business may make you eligible for less, such as $100,000.

Interest rates on a business line of credit

The interest rate on your business line of credit represents how much your lender is charging for the borrowed amount. The lender sets a credit limit, the maximum you’re able to borrow from the lender. Additionally, you’re only charged interest for the money you borrow from the line of credit, not the entire credit limit available.

For instance, if you borrow $5,000 from your $50,000 available credit limit, the interest charges only apply to the outstanding $5,000.

Factors that influence business line of credit interest rates

Business line of credit interest rates are influenced by a variety of factors that determine your business’s creditworthiness. Those factors include:

• Credit scores. The higher your credit score is, the lower the interest rates lenders will be willing to offer you. Most traditional banks will want to see a personal credit score of at least 670 or higher, while online banks may go down to 625 or 600.
• Time in business. Most lenders want to see one to two years in business for a line of credit, though some online lenders will go down to six months. Lenders may offer a larger credit limit with better terms to established businesses.
• Business income. Lenders want to see steady revenue alongside other financial statements that show a picture of solid financial health. Traditional banks may want to see $150,000 to $250,000 in income yearly, while many online lenders accept $100,000.

Types of business line of credit interest rates

Unlike consumer lenders, business lines of credit lenders charge interest rates in different ways, making it difficult to compare borrowing costs side by side. However, you can understand the types of interest being charged to help you make a more informed decision.

Interest rates

Most lenders show business loan interest rates in the form of an annual percentage rate (APR). The APR gives you a complete picture of borrowing costs over the course of the year, including interest and fees. Some lenders also show simple interest, which doesn’t include fees in the calculation.

Factor rates

Some lenders offer business lines of credit using factor rates, which are expressed as a decimal instead of a percentage. The factor rate gets multiplied by the loan amount, resulting in the total fee.

For example, if you take out a loan for $50,000 with a factor rate of 1.2, the loan’s interest would cost $10,000 ($50,000 x 1.2 = $60,000). The amount of interest would be $10,000. That figure doesn’t include any other fees.

To compare factor rates with other loans, you can convert the factor rates to interest. Then, use that interest rate to estimate loan costs if you got a business loan with the same APR. In many cases, the loan with the APR is the cheaper option.

Early payoff and factor rates

Because factor rates get applied to the loan upfront, you won’t save money by paying off the loan early unless the lender offers a prepayment discount.

Weekly or monthly fees

Some lenders charge weekly or monthly fees on outstanding balances instead of interest rates. Because these interest rates don’t account for the cost of the loan over the entire year and don’t include fees, they could end up costing you more than a loan with an APR. Review the total loan cost in the loan agreement and compare it against other business loans.

SBA line of credit

Another option to consider is an SBA line of credit. The SBA offers revolving and non-revolving lines of credit that have maximum interest rates set by the SBA. As of March 2025, the starting interest rate for an SBA line of credit starts at 10.50 percent.

Business line of credit fees

The interest rate doesn’t represent the only costs of using a line of credit. Other fees you might run across:

• Annual fee: The annual fee is a flat fee, usually under $200, that your business may be charged each year to keep your line of credit open.
• Origination fee: If your line of credit charges an origination fee, it is usually a percentage of the loan amount, such as 1 percent to 3 percent. The fee is charged at the time that a new line of credit is opened.
• Draw fee: You may also be charged a fee every time you make a withdrawal from the line of credit. This fee often equals up to 3 percent of the amount withdrawn.
• Maintenance fee: A lender may charge a maintenance fee to keep the line of credit open. It is charged even when an account goes unused.

How to get the best business line of credit rates

If you’ve decided this is the best financing option for your business, know how to get a business line of credit with affordable interest rates and low fees:

• Shop around. Banks, credit unions and online lenders offer business lines of credit. To find the best interest rate, you’ll want to apply or prequalify with multiple lenders to see which one offers you the lowest rate.
• Build your credit scores. The higher your credit score, the better your interest rates. You can build business credit by making payments on time, opening trade credit with current suppliers and keeping your total debt amount low.
• Consider a secured line of credit. While this type of credit line is not as appealing as unsecured lines of credit, lenders are more willing to offer favorable interest rates if you can put up an asset as collateral. The asset acts as security for the loan and reassures the lender that they will not come away empty-handed if you default on the loan.

Alternatives to business lines of credit

A business line of credit comes with downsides and is far from the only way to get an injection of cash into your business. The following are some of the most common types of business loans and financing.

Business term loans

A term loan may be the right choice if your business needs a set sum of cash at once versus having access to funds over time. You will repay the loan with interest over a predetermined term, such as one to five years. This loan may offer higher loan amounts than a business line of credit. You may use this loan to cover a large, one-time purchase for your business, with the purchase often specified in the loan agreement.

Peer-to-peer lending

Peer-to-peer lending allows a business owner to get a loan from multiple individual investors rather than through a traditional bank. These loans are usually funded through a peer-to-peer lending platform. They may not have strict credit score requirements when compared to bank financing. They can have high interest rates or loan fees though.

Peer-to-peer lending is usually best for business owners who need fast cash or haven’t had luck getting any other type of bad credit business loan.

Business credit cards

Both lines of credit and credit cards are revolving lines of funding, allowing you to withdraw funds as needed up to the credit limit. Business credit cards may also come with 0% APR promotional periods and the chance to earn rewards on purchases. They also have easier repayment terms and can remain open for years, while your line of credit may have a maturity date.

A line of credit can have higher funding, but a credit card won’t require an origination fee or the same maintenance fees as a line of credit.

Invoice factoring or invoice financing

Invoice factoring and financing allow you to use your unpaid invoices to gain quick access to financing. With invoice factoring, you sell your outstanding invoices to a factoring company. Invoice financing is more similar to a loan or cash advance, advancing money based on a percentage of your unpaid invoices.

In either case, your invoices act as collateral for the financing. This type of financing may work when you’re in a bind, but it’s likely to be more expensive than a line of credit.

Merchant cash advances

Merchant cash advances (MCAs) calculate the amount of financing you receive based on past credit and debit card sales, and you repay with a percentage of your future sales.

MCAs are a type of business loan for bad credit borrowers and business owners who can’t qualify for fast, short-term funding through a traditional lender. While this is one of the most easily accessible loans, it comes with high interest rates and the risk of falling into a cycle of debt if you can’t pay it off quickly.

Bottom line

The average commercial line of credit rates range from 6.47 percent to 7.06 percent, but rates can go up as high as 60 percent or more. Your exact rates are determined by your creditworthiness, taking into account your credit score, time in business and business financial health. Bear in mind that business lines of credit may come with additional fees like draw fees that make the cost of borrowing higher than other loans.

Compare multiple small business loans to get the best rates and loan features available for your business.

Frequently asked questions

• What is the typical rate on a business line of credit?

  Business lines of credit offer rates ranging from 3 percent to 60 percent, depending on your credit score. The lower your credit score, the higher your overall cost of your business line of credit due to high interest rates and fees.

• Can you get a business line of credit with bad credit?

  Most lenders offering business lines of credit prefer borrowers with at least fair credit, such as a credit score of 600 or higher. You might qualify for a business line of credit with a bad business or personal credit score, though you should expect higher-than-average interest rates. Customers with bad credit often have better luck with alternative lenders than traditional banks.

• How long do you have to pay off a business line of credit?

  With most business lines of credit, the repayment period begins once you draw funds from the available credit limit. Once the repayment period begins, you often have between six months and two years to repay any money you withdrew. The amount of time you have for repayment depends on the terms outlined in your loan agreement.

• Do you need a business plan to get a line of credit?

  Some lenders may require a business plan when applying for a business line of credit, though it’s not always required. If you need help writing a business plan, many organizations offer assistance, including the SBA, SCORE and your local chamber of commerce.