We present a general theory for the coherence of Fano lasers based on a bound state in the continuum. We find that such lasers enable orders of magnitude reduction of the quantum-limited linewidth, and by introducing mirror symmetry breaking, the linewidth can be further reduced. In contrast to ordinary macroscopic lasers, though, the linewidth may re-broaden due to optical nonlinearities enhanced by the strong light localization. This leads to the identification of optimal material systems. We also show that the coherence of this new type of microscopic laser can be understood intuitively using a simple, effective potential model. Based on this model, we examine the laser stability and deduce the dependence of the laser linewidth on the general Fano lineshape. Our model facilitates the incorporation of other degrees of design freedom and can be applied to a general class of lasers with strongly dispersive mirrors.