Unsecured Business Line of Credit

There are two forms of business lines of credit, a secured and unsecured business line of credit. Both accomplish the same goal for a business owner or operator which is provide a source of on-going, available credit that the business can access to carry on the functions of the business. Business lines of credit, both a secured and unsecured business line of credit can range from millions of dollars for a large corporation to a few thousand dollars for a small business.

Applying for a business line of credit is similar to applying for any other form of business loan. The sources may vary depending on the amounts of business credit to be borrowed but in all cases the banks and other financial lending institutions will review the business operations and check the business credit of the company before agreeing to either a secured or unsecured business line of credit.

An unsecured business line of credit is the preferred option for most businesses because it does not come with the conditions that may apply to a secured business line of credit. A secured line of credit means that the owner or operator of the business must provide assets, collateral, or guarantees to the financial institution before being allowed to access the monies. An unsecured business line of credit is dependent only on the business’s credit rating and ability to pay.

The reasons for asking that a business line of credit be secured by these conditions as opposed to allowing an unsecured business line of credit may include the age of the business, poor business credit in the past, or difficulties with any number of specific areas affecting the business itself. These could raise red flags for the lender who considers the business as a higher risk to repay or maintain the conditions of the line of credit and may not be willing to grant an unsecured business line of credit.

For many new businesses it is difficult to obtain an unsecured business line of credit simply because they have not had the time to develop a positive credit relationship with the banks or other lenders. In other cases the owners of the business may have had problems in their personal credit history and banks are reluctant to provide funds under an unsecured business line of credit because of that.

Whether the line of credit is secured or an unsecured business line of credit almost all businesses today have to have one in order to meet the challenges of the modern marketplace. These include uncertain or inconsistent sales, seasonal slumps or natural disasters. There is a saying in business that what can go wrong will go wrong and business lines of credit, both a secured and unsecured business line of credit help insulate companies and businesses against those vagaries of being in business.