In most instances, business owners have to have collateral to expand to new projects. Fortunately, there are options for companies that do not have real estate collateral. These options come in the form of unsecured business financing. With unsecured lines of credit, you don’t have to worry about collateral.
Why Use Unsecured Financing?
When you need funds for your business, you usually need that money right away. Unsecured lines of credit and unsecured business loans are crucial to a company’s survival for a number of reasons. A lot of the time, a business seeks out this type of financing when they need an immediate equipment replacement or the business outgrew its current location.
When it comes to an unsecured line of credit, you only pay for the funds that you use, always have unused funds available and have flexible payments. In addition, the funds are available within 24 hours. This is a flexible form of financing with no need for collateral.
How Does an Unsecured Line of Credit Work?
A business line of credit does not end up backed by real estate collateral. While this might be a high-risk loan for a bank, it is low-risk for the borrower. If you have limited business or personal assets, then you don’t want to end up in a loan where you might lose your assets. With a line of credit, you don’t have to worry about the loss of real estate or other assets. Your credit line works like a revolving business line of credit. You have a maximum amount and repay when you want, with flexible payments.
Unsecured Credit vs Unsecured Loans
The difference between credit and a loan is that you don’t have to use the total amount that the lender gives you. Instead, you are able to borrow against the money on the credit line. Likewise, you don’t have to pay back the entire amount you receive.
Business Lines of Credit Requirements
In order to receive a line of credit, there are a few requirements. In order to qualify, you need about 3 months in business and 120,000 dollars in annual sales. One of the biggest advantages of these credit lines is that you don’t have to have a minimum FICO score.
If you’re stuck in a situation where your business needs funding but you don’t want to put down collateral, then an unsecured business line of credit might be best for you. These are low-risk for borrowers and allow you to have the funding you need right away.