Unsecured business lines of credit are an alternative to traditional loans. Though you may have to offer a personal guarantee, an unsecured business line of credit is basically a form of revolving credit where you do not give security to borrow funds. It is considered to be a higher riskier form of lending for many lenders because collateral is not needed. This type of borrowing is actually quite simple to obtain. These suggestions will help get the ball rolling.
Most people look for unsecured business line of credit applications that do not require collateral. If you happen to be applying for credit cards that do not require collateral, you should inquire about a lower interest rate or introductory interest rate versus a similar credit card that does require collateral. This will help to keep the monthly payments lower, even after considering the amount and frequency of payments.
Of course, credit cards that do require collateral are sometimes better for business borrowers since the lender can take possession of the collateral in the case of non-payment. Other types of unsecured credit cards are less desirable. For example, credit cards that provide rewards points are almost always better for business owners for the obvious reason that they can accumulate reward points.
Business owners who want to get unsecured business line of credit financing that do require collateral are advised to shop around. As previously mentioned, there are some lenders that may be willing to work with business owners who do not have collateral or those who present a very low credit risk. Business owners who have good credit, a large amount of collateral, or an excellent payment history will generally have the best financing terms.
Business owners with bad credit or no history of payment will find that their interest rates will be much higher than those for business owners with good credit, no collateral, and a decent payment history. Of course, business owners with poor credit will find that their interest rates will be much higher than those for business owners with good credit, no collateral, and a decent payment history.
Because many unsecured business line of credit applications are reviewed by lenders as to the level of risk they pose to the lender, business owners who have a low credit score or no collateral may find that their rates are much lower than those for business owners with high credit scores, no collateral, and a history of making on time payments.
The reason for this is that lenders will generally prefer to take on more risk when they are being offered a loan by a company that does not have as much risk as one that does. Therefore, lenders may look at an applicant’s credit score or collateral as a good indication of the risk to the business owner poses to them.
As noted above, many lenders will make an exception for unsecured business lines of credit even if the business owner has poor credit. It is not uncommon for a business owner with poor credit to be able to get an unsecured business line of credit – sometimes they may even qualify for business credit cards. These business credit cards will typically carry very low interest rates – often just a few points lower than their normal interest rates.