A business line of credit is a flexible financing option that can help new business owners manage their expenses and get working capital. It allows them to manage their cash flow and pay for short-term capital needs.
While it can be difficult for a start-up business or startup company to access small business loans, some lenders do offer a business line of credit for start-ups or businesses with one or fewer years in operation.
A business line of credit or business credit card allows the borrower to withdraw funds up to a certain amount, and interest is charged on the money borrowed. Once the borrower repays all the funds they have borrowed, they can continue to draw on the line.
If you are running a business and don’t have time to search for the best loan for your business or build a business plan, BitX Funding can help you find the loan that best meets your specific needs. There are various business lines of credit available, and in this writing, we will focus on a start-up’s unsecured business line of credit.
A Short Overview of Unsecured Business Lines of Credit
An unsecured business line of credit is a debt financing option that offers a revolving credit limit, and you don’t have to have collateral to secure that credit limit. These loans don’t require any collateral but typically come with higher interest rates, lower credit limits, and shorter repayment terms.
A business line of credit with no personal assurance or guarantee may be tricky to come by; therefore, we are here to help. We have everything you need to know about an unsecured business line of credit together. So, if you want to take advantage of these loans, this is very helpful.
Difference Between Secured and Unsecured Business Lines of Credit
A secured line of credit is more secure for the lender because it demands you put in some collateral if you want that amount. This collateral cancan is some real estate or personal asset the lender could sell if you cannot repay the loan.
On the other hand, unsecured lines of credit do not need any collateral. As a business owner, you would like to go with an unsecured business line of credit if you don’t want to risk your assets.
But there is a catch. To access a business line of credit, you must have high annual revenue and a high personal credit score. This is because you are not giving any collateral, so these are the essentials.
Unsecured Business Lines of Credit
This is a fact that an unsecured business line of credit costs you more and requires that you have a well-qualified business. Because your company isn’t offering any collateral for an insecure business line of credit, it is riskier for the lender.
As a result, it isn’t easy to qualify for a loan as they require excellent personal credit, a long time in business, and more revenue. This will impress the lender, and then he can decide whether he is willing to approve your loan request.
In addition, the people who qualify for the unsecured business line of credit will get higher interest rates and low credit limits and have a short time to repay the amount. This is because of the risk that the lender must face.
But, if you can offer collateral for your business line of credit, you will be more likely to qualify for the loan and have ideal rates. Therefore, it is up to you and your duty to find out if this business line of credit is worth it for your business.
Secured Business Line of Credit
If you have collateral to offer for your loan, it counts under the secured business line of credit. This loan comes with low revenues, high credit limits, and low-interest rates. One thing you should keep in mind is that offering collateral to your business line of credit does not mean putting your house or car in line.
But a secured business line of credit may look different from what you think. Because it is backed up with invoices and equipment, it is a secure credit card that requires a deposit.
Who can Qualify for the Secured Business Line of Credit?
After getting all the information now, you may have a question: How can you qualify for this loan? You can easily be eligible for this loan if you have;
- A credit score of 700
- Annual revenue of $200,000
- More than a year in business
You are more likely to get this loan if you have these things. But the interest rates and credit amount depend on the time in your business, annual revenue, and credit score.
Application Process of Secured Business Line of Credit
If you want a secured business loan for credit from the lender or a bank, apply for the loan before you need it. There is no harm in taking out a line of credit before you require it. And when three is an emergency, or you require it, you will have it. At that time, you don’t need to fill out the application and run after the lender to approve your loan request.
The application procedure for the unsecured business line of credit varies from lender to lender. But there are a few things in common for all lenders, and they mostly like to ask for these things from the borrower when applying for the loan.
Bank Statements
They require bank statements from at least the past three months to show your cash flow.
Personal Credit Score
This gives a complete idea of your borrowing history to your lender.
Profit and Loss Statements
It is useful to show the lender all information about the revenue and expense of your business.
Important Business Information
This includes how long you have been doing this business, your industry, and how many owners are there. Banks are more likely to give loans to that business who have at least two years in business. But the lenders are willing to work with start-up businesses.
Personal Tax Returns
This is vital to verify your income.
Business Tax Returns
It is important because it verifies the revenue of your business.
Thus, it is essential to prepare a complete file of your documents so that you can hand over all of them to your lender on time. This also gives them the idea that you know the loan and its requirements, which can be a plus point for you. It can also enhance your chances of getting and qualifying for the loan.
A Quick Wrap-Up!
To summarize the discussion, we can say that various loan options are available regarding financing. The proper of these loans is to help businesses to fulfill their requirements. If you have collateral to offer, you can choose that option, but if you don’t want to put your assets at risk, you can go through and find other options. You might think it is not easy to handle while running business operations.
BitX Funding is an online lender that offers a range of loan options to businesses to help them fulfill their financial needs. Our team of financial experts can help you decide the best loan for your business, whether you have collateral to offer or are looking for a risk-free option.
We are dedicated to providing excellent service to our customer base and are ready to assist you in finding the right loan solution for your business. Contact us today at 203-763-1430 to learn more, or Apply Now to get the process started.
