From time to time, businesses need to take out some form of financing, especially in seasonally low periods. Although there are many ways to obtain business financing, business lines of credit can be some of the best. Having a business line of credit is like having money in the bank: You can tap into it as business needs arise. What’s more, credit lines can generally be utilized in almost any way that a business owner sees fit.
Secured Versus Unsecured: What’s The Difference
There are two main types of business lines of credit: Those that are ‘secured” and those that are ‘unsecured”. An unsecured business line of credit is offered by the lender without the need for the business owner to put up any assets as collateral. They are also referred to as ‘non-collateralized” lines of credit. On the other hand, a secured line of credit is obtained when some form of collateral ‘secures” the loan for the lender in case of default. As you may imagine, an unsecured line of credit is better for the business.
How to Obtain an Unsecured Business Line of Credit
When applying for an unsecured line of credit, the business owner must demonstrate that they are highly likely to pay back any money that is tapped into against the credit line. Here are a few factors that will probably be looked at by the lender:
How long has the business existed? One to two years is generally good enough for most lenders.
How much income does the business bring in? The more, the better. Tax returns and other documentation may be needed.
Is the business creditworthy? Most lenders will want to see a credit report for the business as well as the business owner.
Get in touch with Commercial One Group. They can help you learn more about obtaining an unsecured line of credit for your particular business.