Some loans are beneficial in niche situations. Others are useful for virtually all companies. Business lines of credit fall into the second category. They’re universally helpful, providing significant available capital that you don’t pay interest on unless you’re using it. Why should you choose an unsecured business line of credit for your company?
What Does Unsecured Credit Mean?
When applying for credit lines, you’ll probably run across the terms secured and unsecured frequently. Some lines of credit are fully secured, which means they’re backed 100% by your business assets. You need collateral to qualify, which can be a piece of equipment, money in a bank account, real estate or inventory.
Unsecured credit lines don’t have this requirement. You qualify based only on your company’s financial health and credit rating. There’s no need to have or risk any business assets.
Why Choose Unsecured Lines of Credit?
At first glance, it may seem tempting to go the secured route. After all, secured business credit generally provides lower interest rates, larger funding amounts and lower credit score requirements. The downside is that you need to risk business assets, which is a pretty big catch.
Don’t misunderstand; if your only option is to get a secured line of credit or go without financing, you’re generally better off getting the secured credit. You just have to be far more careful.
When your business has the credit score to qualify for unsecured lines of credit, however, they should always be your first option. Even though you may have to settle for a smaller credit cap, not having to risk business assets is a huge plus.
What Are the Advantages of Unsecured Credit?
Proponents of secured credit may say that the risk of actually losing your assets is very small. That’s true for most businesses, but the reality is that no one can predict what will happen tomorrow. Gambling your business’s future with essential equipment or a real estate property that took you decades to purchase is just too much to risk.
Unsecured credit lines don’t force you to choose. You get a large credit cap and great rates without needing to take any risks. You can use the funds for virtually anything, from payroll to advertising.
This tool is an incredible help for balancing your business’s cash flow. Invest in things that make your business grow while keeping your finances safe and sound. Purchase inventory or buy equipment quickly and easily.