How Does an Unsecured Line of Credit Work?
Most small businesses, even those that have achieved success, sometimes require additional funding. However, applying for and receiving financing from traditional banks or online lenders can take time. One answer to this dilemma is an unsecured credit line. Could unsecured business lines of credit be a good fit for your company? Here is some information.
Business Line of Credit Basics
When you obtain an unsecured credit line for your business, you have access to a predetermined amount of funding. You can draw on this amount, and when you pay back what you have borrowed, you have access to the same amount again. You only have to pay interest on the amount of money you borrow, and there are no penalties for prepayment.
Qualifying for a Business Line of Credit
In your application for a credit line, you will need to provide information such as the annual revenue of your business, how long it has been in operation, and your personal and business credit scores. If your line of credit is unsecured, you will probably also be required to sign a guarantee for the funds. That means that you will be responsible to pay back the lender if your business is unable to handle the debt.
Benefits of an Unsecured Credit Line
If you obtain a secured line of credit, you have to put up collateral such as equipment, real estate, vehicles, inventory, or other business assets. However, for an unsecured credit line, no collateral is required. You can use a line of credit for any financial needs that come up, such as renovations to your properties, employee salaries, marketing, and inventory. Having additional funds available enables you to take advantage of unexpected opportunities when they arise. Additionally, if you repay your line of credit promptly, your credit score can improve.
For more advice on obtaining an unsecured credit line for your business, contact Summit Commercial Capital.