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What are the benefits of unsecured business credit lines?
July 11, 2022 at 7:00 AM
Two businessmen discussing financing options like unsecured business credit lines.

Financing is essential to growth and performance. Unfortunately, acquiring funding can be incredibly difficult, especially for startups and small businesses. Lenders often have strict, prohibitive requirements that impose limits on organizations. Unsecured business credit lines are excellent resources for companies that offer significant benefits and opportunities for expansion. Here are a few advantages they provide:

Shorter application process

One benefit of unsecured business credit lines is the application process is significantly shorter than secured financing. Conventional loans require intensive screening to ensure borrowers can make payments on time and repay their debts.

With unsecured loans, lenders don’t have to review collateral or a business’s credit report, monthly sales, and other variables. This streamlined application process typically results in an expedited funding process that can help businesses receive funds in as little as 24 hours.

This benefit is invaluable for businesses who need an infusion of cash quickly for an emergency or to capitalize on an opportunity.

No collateral

Another advantage of unsecured business credit lines is they do not require collateral. Especially for startups and small businesses, lack of collateral is often an issue when trying to establish credit, which disqualifies many businesses from crucial financing.

Instead of collateral, lenders evaluate other aspects, like business plans and market opportunities. Eliminating the need for collateral often makes unsecured financing less risky since you don’t have to sign away the rights to your personal or business assets.

With secured business loans and credit, lenders can seize property or other forms of collateral easily if you default. With unsecured business credit lines, however, a lender has to go to court and get an order to seize property, which makes retaining assets much easier.

Builds credit

A crucial reason many organizations consider unsecured business credit lines is because they need to build business credit, which you can do with unsecured business credit lines. A solid credit report is a crucial aspect of operating a business that provides your company with significant opportunities that are essential to growing your business. Building credit through unsecured credit lines helps you do things like:

  • Purchase a new car with only the business’ EIN #
  • Obtain business gas and retail cards with no personal guarantor
  • Acquire corporate housing with leases completely under your business name and EIN #
  • Purchase computers and other business-related expenses totally in your business name

Flexible and cheap payment terms

Unsecured business credit lines also offer more flexible and cheaper payment terms, and you can usually get lines of credit for up to $100,000.

Typically, with these financing options, you only pay what you use. Minimum payments can also be as low as 1-2% of what you used. For example, if you have a line of $50,000 and only use $5,000, your minimum payment would be between $50 and $100.

The grace period is also often longer, and the cost of funds when you receive the first round of funding is often between 3% and 8% cheaper than other types.

Schedule a free consultation for crucial business financing

A company without financing is like a plant without water or sunlight, but acquiring funding can be a significant obstacle for many companies. Fortunately, for companies who need a quick cash infusion or face prohibitive lending restrictions, unsecured business credit lines are excellent solutions that provide organizations with the capital they need to expand and develop. With over 30 years of experience, at NTIB Finance & Consulting, we have the expertise and business understanding to help companies thrive. We take the time to understand your goals to tailor financial solutions to you. Get in touch to receive the financing you need to flourish.