An unsecured line of credit refers to financing that is not secured by any collateral but still offers a revolving credit limit. Due to the lack of collateral, these unsecured business lines of credit come with higher rates, lower credit limits, and short-term repayment periods. If you are looking for an overview detailing what to be on the lookout for when getting this financing option, read on for the full brief.
Unsecured Business Lines of Credit vs. Other Small Business Loans
Term Loan vs. Unsecured Business Lines of Credit
Unlike unsecured lines of credit that allow you to use small amounts of funds from your revolving line of credit only when you need them, a term loan advances your desired loan amount in a single instance. With this, you will be required to pay interest on the entire loan as opposed to lines of credit that require interest for only the funds utilized.
Business Credit Card vs. Unsecured Business Lines of Credit
A business credit card resembles a personal credit card that utilizes a swipe option, after which you get funds in your account. The amount advanced will essentially rely on your credit score, unlike lines of credit that need more document approval. Even with this ease of application, your repayment terms will often be monthly as opposed to the flexibility that unsecured business lines of credit offer.
Secured Business Lines of Credit vs. Unsecured Business Lines of Credit
A secured line of credit comes with collateral that offers security to lenders when borrowers default in their payments. Some examples of collateral used include secured credit cards, equipment, or invoices. Rather than using personal and business assets, unsecured lines of credit allow borrowers without such possessions to get access to unsecured funding with ease.
Qualifications for Getting Unsecured Lines of Credit
The application process for unsecured lines of credit typically requires the following:
Profit and loss statements that show proof of your revenue and expenses
Personal credit score to show your borrowing history
Bank statements for the last three months that reflect your cash flow
Individual tax returns for verification of your income
Business identifying information. This will show the type of business you operate, the duration of your business, and the ownership details of the business.
Business tax returns that reflect business revenue
If you need cash on the go without the usual hassles of account upkeep, unsecured lines of credit are your best bet. Get in touch with Park Cedar Commercial Lending today for your funding needs.