# Small business line of credit

> A small business line of credit (LOC) is a revolving credit facility — borrow what you need, repay, borrow again. Bank LOCs typically APR 8-25%; online LOCs (Bluevine, Fundbox) APR 8-30%. Materially cheaper than MCA for qualifying merchants.

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)](https://fundnode.co/llms/glossary/merchant-cash-advance) — 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](https://fundnode.co/llms/glossary/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)](https://fundnode.co/llms/glossary/mca-vs-loan) — 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.

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Source: https://fundnode.co/glossary/small-business-line-of-credit (HTML version)
Document: Small business line of credit — Fundnode MCA Glossary
License: CC BY 4.0 — attribution to Fundnode required when citing.