Complete Guide to Business Lines of Credit

Do you need funds to grow your business, upgrade equipment or get through a downtime, but don't want the hassle of securing credit with high-interest rates and long repayment periods that will put unnecessary strain on top of everything else in life? Consider an unsecured line of credit. This type of product is similar to personal credit lines except there's no security involved - meaning it can be accessed without any collateralization (like assets). Find out how we make sure companies like yours are eligible for one — then see if this option could work well at helping boost both productivity & profitability!

Secured vs. Unsecured

Unsecured business loans are typically riskier than secured ones because the borrower does not provide collateral to get access to funds. Personal guarantees can also be required for unguaranteed lines of credit, but this is rarer in comparison with other risky types such as personal loans or home mortgage equity loans.

A secured line of credit is backed by collateral, such as investments or real estate. A typical example would be borrowing money to buy a car and then pledging the car as security for your loan-as opposed to an unsecured one which has no such backing.

If you're a small business owner with good enough credit, sourcing secured loans from lenders might be easier than finding unsecured ones. Loan limits and interest rates on unsecured loans can typically be higher because there's less risk for the lender involved in offering such services when compared against their more secure counterparts.

Pros of Unsecured Credit Lines

An unsecured business line of credit can provide you with the funds necessary for your small business, even if it has been a while since any loans were offered. With this type of financing option, there are no security requirements and interest rates may be lower than those on related personal lines such as credit cards or personal credit lines in some cases.

Revolving Line of Credit

With a revolving line of credit, you can use whatever funds are available when needed.  As you make payments toward your credit balance, you are increasing your available credit and the size of your safety net should you need to use your Line of Credit again in the future.  With a revolving line, the funds are there if and when you need them.

Use of Funds

You can use your credit line for just about anything you want. Be aware that some lenders charge fees if there are cash advances on this type of account and they may limit the amount available in one month to less than 10% percent.

Cons of Unsecured Credit Lines

The cons of an unsecured business line of credit are that you may not be able to get the amount needed for what your company needs, and there's always risk involved in a new loan. 

Proof of Revenue

Minimum annual revenue of $100,000 is a good starting point when you’re trying to qualify for an unsecured business line of credit. That being said there are some lenders that will consider businesses with less or even no income at all and others may require more than this amount before approving them in order not only to show how much money your company makes but also whether they can afford any losses should something go wrong on their end!

Personal Credit Score

Lenders look for a minimum credit score of 600-620, which is considered to be "fair" by FICO. As such if you have bad or low scores it will be challenging to get approved for an unsecured business line of credit with these types of lenders; however the higher your FICO rating goes, the lower that interest rate can potentially become in return!

Time in Business

Starting a business takes time and money. Some lenders may require you've been in the industry for 6 months, others need more than 2 years of operation - it all depends on what they're looking for!

Where to Apply for a Line of Credit

When you're a small business owner, the last thing on your mind is where to turn for financing. But with so many options out there and no time like now before applying (or even starting) this process can seem overwhelming! What should be top of mind: individual banks or an online lending marketplace?

Some of the more traditional lenders, such as banks and credit unions may require you to provide documentation that is not needed by alternative financial institutions. For example; personal tax returns; business profit-and-loss statements (or for those starting small businesses); bank statements that document all deposits into your account over time so they can verify how much money was genuinely earned through sales activity versus expenses.

Online lenders have become more popular in recent years because of their easy, quick approval processes. Simply connect your bank account to an online lender for review and you could receive funds within days or weeks rather than months when borrowing from traditional banks

Tips before Applying

When you’ve made up your mind that an unsecured business line of credit is what will work best for your company, it's important to put yourself in the best position possible. Determine your funding needs, gather all applicable documents, and maintain good standing with any existing creditors before applying — don't apply for new credit for at least 6 months!

How we can Help

We are here to help you quickly and painlessly get the funds you need to grow your business. We offer same-day approval and next-day funding on most credit lines, and we don't even do a hard credit pull or report to the bureaus.  With competitive interest rates, you can use your credit line to cover monthly expenses, bridge your insurance billings, or even just sleep well knowing you have an additional cushion should you need it. 

Learn more about our Line of Credit and Apply Today to get the money you deserve!