Wells Fargo Business Lines of Credit Review for 2020

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Wells Fargo Business Line of Credit: An Overview

Wells Fargo business lines of credit are some of the most affordable, straightforward business financing options on the market. The three Wells Fargo business line of credit options are:

  1. Unsecured business line of credit: $5,000 – $100,000 limits with rates starting at Prime + 1.75%.
  2. Secured business line of credit: $5,000 – $100,000 limits with rates starting at Prime + 1%.
  3. Prime business line of credit: $100,000 – $500,000 limits with Prime-based rates.

 

Learn all the details about Wells Fargo business lines of credit—including interest rates, application options, and minimum requirements—to find out whether or not they’re the right financing for your business:

How a Business Line of Credit Works

A business line of credit is a type of business loan works a bit like a business credit card, minus the piece of plastic. You get access to a large pool of funds, from which you can make withdrawals as needed to cover expenses for your business. You only have to pay interest on the money that you withdraw, and as you pay back the funds, your amount of available credit goes up.

 Say, for instance, a large customer order comes in, and you quickly need $20,000 to fulfill the order. Let’s say you have a $50,000 business line of credit. You can draw the $20,000 from your line to help you fulfill the order. The remaining $30,000 will sit in your account until you need the money. Once you pay back the $20,000 that you borrowed, your available credit goes back up to $50,000.

This feature where the available credit increases as you pay down your balance is called revolving credit. You will continually have access to a cash cushion as long as you don’t “max out” your credit limit and make payments regularly. Most—but not all—business lines of credit are revolving.

Business credit cards and business lines of credit share this feature. But there are important differences between credit cards and lines of credit. For starters, lines of credit deal in cash, whereas credit cards will charge you for cash advances. Additionally, lines of credit tend to have longer repayment terms and lower interest rates than credit cards.

Wells Fargo Business Lines of Credit: The 3 Options

Wells Fargo is an immediately recognizable name for many people. This is one of the largest national banks in the US, both in terms of assets and number of branches. But don’t let the bank’s size scare you—they’re also one of the best banks for small business loans. Wells Fargo also regularly tops the list of the most active SBA lenders in the nation, proving their dedication to helping small businesses grow.

The bank has a wide array of small business lending products, from Wells Fargo SBA loans to Wells Fargo equipment finance products.

Wells Fargo offers three different business lines of credit.

1. Wells Fargo Unsecured Business Line of Credit

The Wells Fargo Unsecured Business Line of Credit is called “unsecured” because you don’t need to provide any collateral to secure your line of credit. This Wells Fargo business line of credit option offers $5,000 to $100,000 unsecured revolving line of credit with rates starting at Prime + 1.75%.

    Features

    The features of Wells Fargo’s Unsecured Business Line of Credit include:

    • Rates starting at Prime + 1.75%.
    • Revolving credit limit ranging anywhere from $5,000 to $100,000.
    • 5-year scheduled review to renew the line, rather than an annual one.
    • No cash advance fees unless you’re using the card over the counter or at an ATM.
    • You can set up automatic payments by linking your business checking account.
    • Access funds by telephone transfers. Mastercard debit card, checks, or at a bank or ATM.
    • Enrollment in a free rewards program.

    Note that if your credit limit is above $10,000, you’ll have to pay an annual fee. For credit limits from $10,000 to $25,000, the fee is $95, and for credit limits over $25,000, the fee is $175.

    Since these credit lines are unsecured, they are a good option for new businesses that need working capital to expand. They are also a good choice for more established businesses that aren’t asset-heavy (i.e. don’t have much to offer as collateral) and need flexible access to cash.

Skip the Wells Fargo Unsecured Business Line of Credit if:

  • You have valuable business assets or a Wells Fargo savings account or CD that you can pledge as security.

The Wells Fargo Unsecured Business Line of Credit is good for:

  • New and established businesses that want flexible access to cash and don’t have much in the way of business assets.

2. Wells Fargo Secured Business Line of Credit

The next Wells Fargo business line of credit option is the Wells Fargo Secured Business Line of Credit. This option is referred to as “secured” because you have to pledge something of value in exchange for receiving the credit. That “something of value” is a Wells Fargo savings account or CD account. Your credit line depends on how much money is in your savings account or CD.

Since the bank accounts are used as security, the rates on these lines. starting at Prime + 1.00%, are even lower than on the unsecured line of credit.

    Features

    The features of Wells Fargo’s Secured Business Line of Credit include:

    • Rates starting at Prime + 1.00%.
    • Revolving credit limit ranging anywhere from $5,000 to $100,000.
    • No annual reviews.
    • No cash advance fees unless you’re using the card over the counter or at an ATM.
    • You can set up automatic payments by linking your business checking account.
    • Access funds by telephone transfers. Mastercard debit card, checks, or at a bank or ATM.

    This line of credit doesn’t come with a designated repayment term, so you can repay your withdrawn funds on your own schedule. And as with any business line of credit, you only pay interest on withdrawn funds.

    The annual fee on this line of credit is $50 every year, no matter what your credit limit is.

Skip the Wells Fargo Secured Business Line of Credit if:

  • You don’t have sufficient cash in a Wells Fargo savings account or CD.

The Wells Fargo Secured Business Line of Credit is good for:

  • Businesses with a significant amount of cash in a Wells Fargo savings account or CD, to pledge as collateral for the line of credit.

3. Wells Fargo Prime Line of Credit

The last option is the Wells Fargo Prime Line of Credit, which offers a $100,000 to $500,000 revolving line of credit that is secured by business assets to businesses making $2 to $5 million in sales revenues. Businesses making less than that can qualify, but the target account holder is the owner of an established, asset-heavy business.

You can pledge any non-real estate asset, such as inventory, machinery, accounts receivable, or cash, as collateral.

    Features

    The features of Wells Fargo’s Prime Business Line of Credit include:

    • Competitive rates linked to the Prime Rate (there’s also an origination of 0.50% of the loan amount).
    • Revolving credit limit ranging anywhere from $100,000 to $500,000.
    • One-year draw period with unlimited access to the full credit limit.
    • Interest-only payments during the one-year draw period.
    • Renewable annually.

    This line of credit is designed for short-term larger purchases and is perfect for slightly larger companies.

Skip the Wells Fargo Prime Line of Credit if:

  • You don’t have sufficient business assets or have a new business.

The Wells Fargo Prime Line of Credit is good for:

  • Businesses with a significant amount of non-real estate business assets, to pledge as collateral for the line of credit.

Wells Fargo Business Line of Credit Application

The Wells Fargo business line of credit application is accessible in two ways: Online or at a branch. Here are the details on the two Wells Fargo business line of credit application options:

    1. Apply Online

    Wells Fargo’s Unsecured and Secured Business Lines of Credit offer the option to apply online, if you have a Wells Fargo checking or savings account that’s been open for at least one year.

    2. Visit a Branch

    You must visit a branch in person in order to apply for Wells Fargo’s Prime Line of Credit. You can apply for the other two credit lines in person as well. Locate a branch near you.

If applying online, be prepared to provide information and documentation about yourself and about your business. You’ll need to know your Business’s Tax ID number, gross income, business bank account numbers, and the names of all business owners. You’ll be able to upload requested documentation and check the status of your application online.

Wells Fargo Business Line of Credit: Top Alternatives

Before you move forward with Wells Fargo lines of credit, you should consider your options at other banks as well. A Capital One business line of credit or a Bank of America business line of credit will be fairly similar products to Well Fargo’s.

But even if the Wells Fargo lines of credit (or options from other banks) sound ideal for your business, they are not going to be of much help to small business owners who aren’t highly qualified. Like most banks, Wells Fargo works with only the most creditworthy borrowers.

On on top of that, Wells Fargo could take several weeks to underwrite your application before disbursing the funds to your account. If you’re less qualified or in need of quicker funding, then the Wells Fargo business line of credit might not be the best source of working capital for your business.

1. Kabbage

Kabbage is an online lender who provides revolving funds to businesses that need quick access to capital.

If you decide to get a business line of credit through Kabbage, you’ll gain access to a line of credit with terms that falls somewhere within these ranges:

  • Credit limits that can range from $2,000 to $250,000
  • Repayment terms from 6 months to 12 months
  • Rates charged as a flat monthly fee of 1.5% to 10% of your remaining loan amount

Qualifying is much easier compared to a bank line of credit. To qualify with Kabbage, you need 12 months in business and $50,000 in annual revenue.

Kabbage’s application and underwriting processes are highly automated, so they can fund you within a matter of hours.

Read Our Kabbage Review

2. Fundation

Fundation is another lender who offers fast lines of credit to lesser-qualified business owners. This lender offers lines of credit that are longer-term than Kabbage, which can make repayment more manageable for small business owners.

If you qualify for a Fundation business line of credit, then you’ll gain access to revolving funds that will fall somewhere within the following ranges of terms:

  • Credit limits ranging anywhere from $20,000 to $500,000
  • Repayment term length from 1 year to 4 years
  • Interest rates as low as 7.99% to as high as 28.99%

Fundation’s lines of credit offer more ideal terms, but as a result, they are a bit more difficult to qualify for than Kabbage’s. You must have a personal credit score of at least 620. And your business must be at least 2 years old and generating at least $100,000 in annual revenue.

Read Our Fundation Review

3. Business Credit Cards

As we mentioned earlier, business credit cards and business lines of credit are similar in many ways. They both provide access to a pool of money that you can draw on as needed. You only pay interest on the money that you use. And both are excellent for accessing emergency cash.

Business credit cards, when you can’t qualify for a more traditional line of credit, are a great substitute. In fact, you might find that you like business credit cards even more because they come with better rewards, cash back, and sign on bonuses. Many issuers even offer a 0% introductory interest rate for several months after opening your account, essentially allowing you to borrow money for free within that time frame.

The difference is that business credit cards come with a lower credit limit, and you have to make at least a minimum payment to the card issuer each month. As a result, you can’t make very large purchases on a credit card and have to keep up with regular payments.

Find The Best Business Credit Card

Wells Fargo Business Lines of Credit: The Bottom Line

Wells Fargo business lines of credit offer some of the very best terms out there. Low business line of credit interest rates, flexible repayment, and large credit lines are the top selling features. That said, Wells Fargo is a bank, and qualifying for a bank line of credit is difficult. If you’re not able to qualify at the moment, several alternative products provide a similar solution.

Vice President and Founding Editor at Fundera

Meredith Wood

Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera. She launched the Fundera Ledger in 2014 and has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending. She is a monthly columnist for AllBusiness, and her advice has appeared in the SBA, SCORE, Yahoo, Amex OPEN Forum, Fox Business, American Banker, Small Business Trends, MyCorporation, Small Biz Daily, StartupNation, and more. Email: meredith@fundera.com.
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