The prime rate sits at 8.5% as of May 2026. A business with a 700 credit score and two years of operating history should expect a bank LOC at prime plus 2-3% — roughly 10.5-11.5% APR. A business with a 640 credit score applying to an online lender might see 28-35% APR. That 20-point difference in rate is almost entirely explained by credit profile, not market conditions.
This guide covers current rate ranges by lender type, the six factors that move your rate up or down, how bank LOC rates are actually constructed, and five tactics that reliably produce lower rates when applied correctly.
Current Rate Ranges by Lender Type (May 2026)
Rates shift with the federal funds rate environment, but the spread between lender categories is structurally stable. Here is where each lender type sits as of May 2026:
The SBA rate appears more expensive than the best bank rates but is typically cheaper than mid-range bank LOCs. For businesses with credit profiles in the 680-720 range that don't qualify for a bank's best pricing, SBA CAPLine often delivers better economics. For a full comparison, see our SBA vs. traditional LOC analysis.
| Lender Type | APR Range | Rate Basis | Fixed or Variable | Best For |
|---|---|---|---|---|
| Major Banks | 7.5–17% | Prime + spread | Usually variable | 680+ credit, 2+ years |
| Regional Banks | 8–16% | Prime or SOFR + spread | Usually variable | Established local relationships |
| Credit Unions | 8–14% | Prime + spread | Fixed or variable | Members with good credit |
| SBA CAPLine | 11–13% | Prime + 2.75–4.75% | Variable | $500K+ needs, 680+ credit |
| Bluevine | 15–30% | Fixed rate per draw | Fixed per draw | 12+ months, $120K revenue |
| OnDeck | 29–55% | Weekly rate | Fixed per draw | 600+ credit, fast funding |
| Fundbox | 20–35% | Weekly fee | Fixed per draw | Early-stage, 3+ months |
For the most detailed current rate data, see our companion piece on business line of credit interest rates for 2026.
The Six Factors That Set Your Rate
Lenders don't assign rates randomly. Every rate offer is the output of a risk-pricing model that weighs the same core variables. Understanding these variables tells you exactly where to focus to improve your rate.
1. Personal Credit Score (Largest Single Factor)
Your personal FICO score is the most powerful lever in the rate equation for businesses under $5M in revenue. The difference between a 620 score and a 740 score can mean a 15-20 percentage point rate difference at the same lender. Most lenders tier their pricing by credit score bands — moving from one band to the next often produces a step-change reduction in rate.
2. Time in Business
Under 12 months: limited to online lenders at high rates. 12-24 months: online lenders with improving rates, some credit union access. 24+ months: full bank LOC access at competitive rates. Each year of operating history reduces perceived lender risk. The two-year threshold is the most significant gate in the market.
3. Annual Revenue and Cash Flow Consistency
Lenders care about two revenue dimensions: total volume and consistency. A business with $500K in revenue that shows highly volatile monthly deposits may price worse than a $300K revenue business with consistent, predictable cash flow. DSCR — debt service coverage ratio — is a key metric banks calculate. DSCR above 1.25 is typically required; above 1.5 produces better pricing.
4. Collateral
Secured lines carry lower rates than unsecured lines across all lender categories. Offering specific collateral — real estate, equipment, receivables — reduces lender risk and should produce a 1-3% rate improvement. Even a blanket business lien (UCC-1) is better than nothing from a lender's risk perspective.
5. Existing Banking Relationship
Banks price relationship depth. A business with primary checking, payroll, and merchant services at the same bank receives meaningfully better credit terms than a new customer. This relationship premium is real — often 0.5-2% lower spread for established relationships.
6. Facility Size
Counterintuitively, larger facilities often carry lower rates. A $500K LOC at a bank typically prices better than a $100K LOC from the same institution. The bank's fixed cost of originating and servicing the loan is the same regardless of size — so larger facilities have better unit economics for the lender, which they pass through as better rates.
The compounding effect: These six factors interact multiplicatively. A business that improves its credit score from 640 to 700, adds collateral, and moves its primary banking to the lender might reduce its rate by 8-12 percentage points. Each factor matters — but all six together produce the most dramatic improvement.
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Check Capital Eligibility →How Bank LOC Rates Are Actually Calculated
Bank LOC rates follow a transparent formula: Base Rate + Credit Spread = Your Rate.
The base rate is an index — typically the Wall Street Journal Prime Rate (currently 8.5%) or SOFR (Secured Overnight Financing Rate, which tracks slightly below prime). The credit spread is the lender's risk premium on top of the base rate, determined by your credit profile.
A borrower with a 700 credit score and solid financials might receive prime + 3% = 11.5%. A borrower with a 740+ score and a strong banking relationship might receive prime + 1.5% = 10%. A borrower with a 680 score and limited banking relationship might see prime + 5% = 13.5%.
When prime rises (as it does when the Fed raises rates), your rate rises by the same amount. When prime falls, your rate falls. This is the core risk of variable-rate LOCs. For more detail, see our analysis of draw periods and fee structures.
Variable vs. Fixed Rates: Which Protects You More
Most bank LOCs are variable — tied to prime or SOFR. This means your rate changes when the Fed moves rates. In a falling rate environment, variable is better. In a rising rate environment, fixed protects you.
Online lenders typically offer fixed rates per draw. Once you draw $50,000, the rate on that specific draw is fixed for the repayment period. This creates more payment certainty but means you don't benefit if market rates fall.
The strategic question: if you expect to carry a balance for more than 6 months, and you believe rates will rise, fixed is worth paying a slight premium for. If you intend to repay quickly (30-60 days), variable rate risk is minimal — there won't be time for a significant rate move to affect you materially.
Most businesses with ongoing working capital needs should prefer a variable bank LOC for long-term use — the base rates are lower, and over a multi-year relationship you'll benefit from any rate decreases.
Rate by Credit Score: The Real Data
The following table represents typical rate outcomes by credit score band for bank LOC applicants with 2+ years in business and $300K+ annual revenue as of May 2026:
| Credit Score Band | Typical Bank LOC APR | Typical Online LOC APR | Primary Option |
|---|---|---|---|
| 620–640 | Not typically approved | 30–45% | Online lenders only |
| 641–659 | Not typically approved | 25–35% | Online / some credit unions |
| 660–679 | 14–17% (some banks) | 20–30% | Credit union preferred |
| 680–699 | 12–16% | 18–26% | Bank or credit union |
| 700–719 | 10–14% | 15–22% | Bank LOC |
| 720–739 | 9–12% | 15–20% | Bank LOC |
| 740+ | 7.5–11% | Not necessary | Bank LOC (best terms) |
The jump from 679 to 680 is particularly significant — it opens access to the full bank market. If your score is 675-679, it's worth spending 1-2 months improving it before applying. See our business credit score guide for improvement tactics.
How to Negotiate a Lower Rate: 5 Proven Tactics
1. Get competing offers before negotiating
No lender will voluntarily offer their best rate without competitive pressure. Apply to at least 2-3 lenders simultaneously and receive written rate offers. Present these to your preferred lender and ask specifically: "Can you match or beat this rate?" Banks can and do move on rate when presented with documented competing offers. The spread reduction available through negotiation is typically 0.5-2%.
2. Offer to deepen your banking relationship
Bank LOC pricing is tied to relationship depth. If you're applying at a bank where you don't already bank, offer to move your primary business checking, payroll, and merchant services upon approval. This is a material concession from the bank's perspective and often produces a 0.5-1.5% rate reduction.
3. Pledge collateral even when not required
For LOCs under $100K where the lender doesn't require collateral, volunteering a specific asset — equipment, a cash deposit, receivables — can reduce your rate. It signals low-risk intent and reduces the lender's downside. Even a partial collateral pledge (e.g., $50K in equipment against a $150K line) has a measurable effect on pricing.
4. Request a lower origination fee in exchange for a slightly higher rate (or vice versa)
Lenders have flexibility in how they structure total loan economics. If a 1% origination fee on a $200K facility ($2,000) is painful upfront, ask to roll it into a slightly higher rate. Conversely, if you can pay the fee upfront, ask for a lower rate. This trade-off is negotiable at most banks.
5. Time your application to Q4
Banks have annual lending targets. In Q4, lenders who are behind on origination volume are more motivated to close deals — which translates to more flexibility on pricing. This effect is most pronounced at regional and community banks. Applications in October-November tend to produce more aggressive pricing than mid-year applications at the same institution.
What you cannot negotiate: The base rate index (prime or SOFR) is set by the market — no lender can change it. Your negotiating leverage is entirely on the spread. Even small spread reductions compound meaningfully over multi-year LOC relationships.
Total Cost of Capital: Why Rate Alone Is Misleading
The stated APR on a business LOC does not tell the full cost story. Total cost of capital includes: interest rate, origination fee, annual fee, draw fee, and unused line fee. A seemingly lower-rate product can have higher total cost once all fees are included.
Consider two $200,000 credit facilities used at 50% average utilization for 12 months:
- Option A: 9% APR, 1% origination fee ($2,000), $500 annual fee, 0.25% draw fee per draw (assume 4 draws = $500). Total annual cost: $9,000 + $2,000 + $500 + $500 = $12,000
- Option B: 12% APR, no origination fee, no annual fee, no draw fee. Total annual cost: $12,000. Total: $12,000
These products have identical effective cost despite a 3-point APR difference. Always build a full fee model before comparing offers. Ask every lender to provide a total cost of credit estimate for your specific use case (utilization amount and draw frequency).
For a detailed breakdown of fee structures across LOC products, see our guide to draw periods and fees and our analysis of what lenders evaluate.
Frequently Asked Questions
The average across all lender types runs approximately 16-20% when weighted by loan volume. Bank LOCs (the largest volume category) average 10-13% for approved applicants. Online lenders push the average up with rates in the 20-35% range. The right benchmark is your lender category — compare bank rates to bank rates, not to online lenders.
Interest paid on a business line of credit used for legitimate business purposes is generally tax deductible as a business expense. If you mix personal and business use on a line of credit, only the business-use portion is deductible. Consult a tax professional for your specific situation — the rules around mixed-use credit are nuanced.
If your LOC is variable and tied to the prime rate, every 0.25% move in prime produces a 0.25% move in your rate. The Federal Reserve's rate decisions directly affect your borrowing cost. Businesses with large outstanding balances on variable LOCs should monitor Fed meeting outcomes and build rate sensitivity into their cash flow planning.
Some banks offer fixed-rate LOC options, and most online lenders price per draw at a fixed rate. Fixed rates are typically 0.5-2% higher than variable rates to compensate for rate risk the lender takes on. Fixed rates make sense for businesses that plan to carry sustained balances and want budget certainty, particularly in a potentially rising rate environment.
Many bank LOCs charge an unused line fee — typically 0.1-0.5% annually on the undrawn portion of your facility. A $200K line with $100K unused at a 0.25% unused line fee costs $250/year in carry costs even without drawing. Factor this into your cost-of-capital calculation. Online lenders typically do not charge unused line fees.
Variable rate LOCs tied to prime change whenever the Federal Reserve adjusts the federal funds rate, which typically happens at scheduled FOMC meetings (8 per year). SOFR-tied products adjust more frequently — SOFR is published daily. Fixed rate products (common in online LOCs) don't change during the draw repayment period.
APR (Annual Percentage Rate) is a standardized annualized cost measure — it allows apples-to-apples comparison across products. Factor rates are a multiplier applied to the draw amount: a $100,000 draw at a 1.25 factor rate means you repay $125,000 regardless of how quickly you pay. Factor rates do not account for time value of money — they overstate cost on fast repayments and understate it on slow ones. Always convert factor rates to APR before comparing.
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This is educational content, not financial advice.
Check Capital Eligibility →Financial Disclaimer: The information on this page is provided for educational and informational purposes only and does not constitute financial, investment, legal, or tax advice. Credit availability, terms, and rates vary by applicant profile and market conditions. Consult a qualified financial advisor before making capital decisions.
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