A business line of credit gives a brand an extra push through extra funds that can be used to grow your business or help you to take advantage of an opportunity that will help boost the finances or status of a company.
If you are looking for an unsecured business line of credit, you basically want to borrow money without having to use collateral. Take note that such business lines of credit may come with higher interest rates.
What’s The Difference
When comparing secured LOC vs unsecured line of credit, it actually boils down to having or not having a collateral.
Secured line of credit, just as the name suggests, requires you to put up collateral. An unsecured business LOC does not require such. The credit worthiness of your company helps lenders determine if they can open a line of extra funds for our brand.
If you have a relatively new business, you might only be able to get a small amount. This will be a good opportunity for you to establish a good credit history.
The amount of line of credit will depend greatly on the revenue of your business, the age of the company, and business expenses.
Types of Unsecured Business Lines Of Credit
When you approach a lender and request it to extend a line of credit to you, the approval will depend whether you are seeking for a traditional and non-traditional line of credit
* Traditional – This kind of unsecured business line of credit will require a ton of documentation from you. With your application, you might be required to attach your personal and tax returns, information about your bank account, plus other documentation such as business registration. This may also come with a regular business review in order to keep the line of credit open.
*Nontraditional – Lenders can also give you a nontraditional form of credit line that may include a credit card issued under the name of your business. This credit card provides quick access to funds and provides some flexibility in terms of payment. This kind of unsecured business LOC requires less paperwork. No annual review will be required.
What Are The Requirements
If you are looking to apply for an unsecured business credit line, the bank or financial institution will check your credit report. They want to make sure that you and the business have a good credit score. The lender will also check your payment history and see if you have good relationship with them or other financial institutions. For those with bad FICO scores, the lender might not grant you an unsecured LOC but you might be able to get a credit line using a collateral.
You also need a bank account. The lender will look into your account’s balance and see if you do not bounce checks or overdraw frequently.
The lender may also ask you for the financial records or history of your business. This will help them determine if your business has strong financial fundamentals and that you will be continuing operations in the future.
Interested in a line of credit to boost your business potentials. Here’s how you can qualify for unsecured business line of credit.