Line of Credit vs. SBA Loans: Compare Business Funding
Business line of credit vs. SBA loans — flexible revolving capital compared to long-term government-backed financing.
Business Line of Credit: A revolving business line of credit lets you draw funds as needed up to a set limit and only pay interest on what you use. SBA Loan: SBA 7(a) and 504 loans are government-backed programs offering some of the lowest rates and longest terms available for qualifying small businesses.
Business Line of Credit vs. SBA Loan — side by side
| Business Line of Credit | SBA Loan | |
|---|---|---|
| Typical amount | $10,000 – $500,000 | $50,000 – $5,000,000 |
| Typical term | Revolving (12 – 24 month draw period) | 5 – 25 years |
| Rate | 8% – 36% APR | Prime + 2.25% – Prime + 4.75% |
| Minimum time in business | 6 months | 2 years |
| Minimum credit score | 580+ | 650+ |
Which is right for your business?
- Business Line of Credit tends to fit best when you need ongoing cash flow or seasonal inventory.
- SBA Loan tends to fit best when you need business acquisition or real estate purchase.
Frequently asked questions
What is an SBA CAPLine?
The SBA CAPLine program provides revolving lines of credit up to $5M for working capital, seasonal financing, contract financing, and builders' lines. It functions like a conventional line of credit but with SBA backing, which can improve rates and terms for businesses that qualify.
