It is a fact that even if you are a start-up or a well-established business, you may need to access cash from time to time. Therefore, people look for ways to get money from online lenders or banks, but both are time-consuming. But what if I tell you that you can access a loan with which you can borrow money, pay it back, and borrow it from the same source without renewing it? Doesn’t it sound exciting? Yes, you read it. With the help of Business Lines of Credit, you can get the cash amount when you need it, as a credit card works.
What is an unsecured Line of Credit?
An unsecured line of credit is also known as a revolving line of credit that lets business owners borrow some money so that a conventional loan does not work. With the small business line of credit, a lender does not approve your application and hand the money over to you. On the contrary, you can borrow cash to a specific credit limit and spend that to fulfil your business requirement. Here are a few more tips and facts that are helpful for you if you want to understand how these lines of credit work.
- You must pay the interest rate on the amount you borrow from the lender.
- You must pay a monthly or annual fee even if you are not using your line of credit.
- There are no payment penalties, as you have an interest-free grace period to enjoy more credit cards.
- There are no cash advance fees.
- You can request to get the cash amount directly to your bank account, allowing you to use the funds with creditors.
- It takes one business day for the funds you draw to deposit into your bank account.
Unsecured Business Line of Credit
Undoubtedly, most businesses would prefer to get a loan without putting up their asset on the line. Some companies, such as small start-ups, may need more support than a lender would be willing to accept. If you are one of those businesses, a business line of credit is the best option.
This line of credit works much like a simple business credit card account. You can easily borrow cash from your account limit if you manage the budget well and repay the amount as agreed. You can borrow again against the same line of credit in the future.
The best thing is that you don’t have to put any collateral to access this line of credit. This sounds great because it can reduce your risk as a borrower. But o one thing you should remember is that an unsecured line of credit costs more than secured financing.
Unsecured business lines of credit come with less risk for the borrower, but more risk for the lender. Therefore, the lenders have terms and conditions for offering these lines of credit.
- Issuing low credit limits
- Requiring short repayment terms
- Asking you to give a personal guarantee
- charging higher interest rates and fees
But unsecured business lines of credit are a good choice. You need to make sure that you know all the pros and cons before you pay for the loan. Although, if you need clarification, BitX Funding can help you find the best financing option for your business.
Personal Guarantees on Unsecured Business Lines of Credit
Online lenders only approve loan applications for business when they are comfortable with the risk involved. Or they know you are a responsible borrower and pay back the amount on time. If you are not giving any collateral to secure your business line of credit, there is an excellent chance that the lender will ask to sign a personal guarantee. This way, they minimize the risk involved in a business line of credit and approve your loan application.
A personal guarantee makes you a co-signer on the business line of credit, and signing a personal contract means you promise to repay the debt if your business doesn’t pay it back. Moreover, it is another way for the lender to ensure that the business owners must put something, if not an asset.
How to Qualify for the Unsecured Business Line of Credit?
Every lender has its requirements when it comes to applying for a loan. But a few things that all of them are in common are.
What is the total revenue of your business?
For verification, a lender may want to see the minimum earnings amount, including the tax returns and other financial statements.
How long have you been in business?
Many lenders give the line of credit to businesses with at least one or two years in their business.
Do you meet the credit score requirements?
This includes your personal and business credit score.
What is your Credit history?
Most lenders will review your credit card reports as a part of the application process.
Thus, lenders may look at your personal and business credit scores to determine the capability of your business. So, the higher the credit score is, the lower the interest rates you will get.
How can you access an unsecured Line of Credit?
To qualify for a business line of credit, you must pick up a lender and apply. They will handle the application, and you can use the funds how you want to.
But, choosing a lender that can approve your loan application for an unsecured line of credit takes work, and it is one of the most complicated parts of a line of credit.
That is why BitX Funding provides recommendations and suggestions based on the company’s information and credit history. You can count on us whether you want to go with small business loans or business credit lines.
We have financial experts with decade-long experience that will give you the best loan option. We will help you by narrowing down the options so that you can decide on the loan that meets the specific needs of your business.
For What purpose can you use the Unsecured Line of Credit?
You can use a business line of credit to fulfil your business needs. Some most common uses are as follows:
- Purchase equipment
- Buy inventory
- Hiring staff
- Improving renovations
- Expanding business
- Marketing program
So, once you get approval for the line of credit, you can access cash and fulfil all your business needs.
The Bottom Line!
To summarize all the discussion, businesses must know more about the unsecured business line of credit. But if you want professionals to handle all the paperwork and loan responsibilities for you, you can rely on the expertise of BitX Funding. We are one of the top and well-established financial companies offering high-quality services, and we offer these services at a very competitive price, so call us and get a loan today.