Unsecured Lines of Credit Benefits
In the continual search for the best, smartest and least expensive methods of financing your business, unsecured lines of credit are among the top contenders. Like all financing options, they have their pluses and minuses. For your business to qualify for one of these loans, it typically has to illustrate a certain level of achievement. In most cases, this means being in business for a number of years, a solid credit rating and robust annual revenues.
No Collateral Needed
In the most basic terms, a secured line of credit means that a business is putting up something of value to get a loan. If the business defaults on the loan, the loan company takes the collateral, whether it is a car or a house or some other asset. This protects the loan company and is one reason why these types of loans are more common. With unsecured lines of credit there is no collateral needed, making this type of loan potentially riskier for the loan company.
This type of loan can be advantageous for you because you don’t have to risk losing a part of your business if you have to default. Your success in business and your proven track record of being responsible with your finances opens up this opportunity for you. It is not available to everyone.
Steady Stream of Capital
With a line of credit, secured or unsecured, you typically get to use money as you need it, up to the amount you have been approved for. If you need the money, for the repair of a roof or a furnace, or if you wish to add on to your company, you simply access the line of credit. If you don’t need the money, you do not pay interest on it. The versatility of unsecured lines of credit can save you money in several ways. Because you have a good track record, these loans often come with favorable interest rates and reasonable fees.
Another benefit of this type of financing is that you do not have to constantly reapply for more money. The term of the loan might be somewhat open-ended, allowing you a little more flexibility in how you repay. You will still have to make minimum payments on time, but the terms are often favorable.
Enjoy the Benefits
Unsecured lines of credit are a great option for your business. They grant you flexibility and affordability in financing the needs of your company.