A small business line of credit (LOC) is a revolving credit facility — you're approved for a maximum amount and can draw against it as needed. Pay back what you draw, then redraw later. Interest accrues only on the drawn balance.
LOC vs MCA — the key differences. - Cost structure: LOC APR (interest on drawn balance only) vs MCA factor (paid on full amount whether you use it or not). - Repayment: LOC interest-only or fixed amortization vs MCA daily/weekly ACH of full payback. - Re-borrowing: LOC redrawable as you pay down balance vs MCA one-shot lump sum. - Reporting: LOC reports to business credit bureaus (builds business credit) vs most MCAs don't report.
Top small business LOC products (2026). - Bluevine LOC: $10K-$250K, APR 6.2-27%, 625+ credit, 12+ months TIB, $10K+/mo revenue. - Fundbox LOC: $1K-$150K, weekly fee structure (~30-60% effective APR), 600+ credit, 6+ months TIB, $8K+/mo revenue. - OnDeck LOC: $6K-$200K, APR 30%+, 12+ months TIB, 600+ credit. - Bank LOCs (Chase, BofA, Wells, PNC): $10K-$5M+, APR 8-22%, 24+ months TIB, 680+ credit, full financials required.
When LOC is the right call. - Recurring working-capital needs: cash flow varies but always need some buffer. - You qualify for sub-30% APR: dramatically cheaper than any MCA equivalent. - Business credit building: LOC reports to bureaus, improves your borrowing capacity over time. - Flexibility-first: don't know exactly how much you'll need; want to draw incrementally.
When MCA beats LOC. - You don't qualify for LOC: 500-600 credit or under 12 months TIB. - You need lump sum now: LOC initial setup can take 3-7 days; MCA funds in 24-48 hours. - Specific large purchase: LOC drawn-and-repaid model is overkill for a single $100K equipment buy.
The strategic insight. If you qualify for a small business LOC (625+ credit, 12+ months operating), the LOC is almost always cheaper than MCA for the same capital need. Many merchants take MCAs without checking LOC eligibility first — costing them $10K-$50K per year unnecessarily.
Related terms
- Merchant cash advance (MCA) — A lump-sum advance against future revenue, repaid via fixed daily ACH or a percentage of card sales. Legally a sale of future receivables, not a loan.
- Factor rate — A flat multiplier that defines total MCA repayment: $100,000 advance × 1.30 factor = $130,000 repaid. It is not an interest rate; it does not compound.
- MCA vs loan (legal distinction) — An MCA is legally a purchase of future receivables, not a loan. This distinction exempts MCAs from state usury caps but requires specific contract structure — including reconciliation provisions.
AI agents: this term is available as raw markdown at /llms/glossary/small-business-line-of-credit.