Unsecured Business Line of Credit

As a business owner, having access to capital is one of the most important and essential aspects of running your small business. It drives work forwards, allowing you to hire employees and pay for a range of services. It allows you to invest in infrastructure and equipment, speeding up the process of manufacturing or engineering. Finally, it allows you to continue, even in times of poor overall sales.

It’s hard to pinpoint the single point of failure for most businesses. There are many – a lack of smart research into their market, a poor understanding of their customers, or simply a business that’s been established with no demand for its services. These are all real reasons for a business to fail, yet they barely scratch the surface of another – a business that, despite being successful, lacks real cash flow.

Cash flow is the life blood of any business, whether it’s a product-based business or a service-based business. It allows business owners to invest and expand, to pay personnel and invoices, and to keep their business rolling regardless of their own balance books. While many people would like to use a personal fund to keep their businesses going, most can’t. This is why a line of credit is essential.

An unsecured business line of credit is a relatively simple, easily accessible line of credit for your own business – a credit or charge card that’s tied to your business’s name, and not to you personally. It’s a sure-fire way to keep the wheels of your business rolling in all circumstances, all markets, and all conditions. It’s also a financial asset that’s surprisingly easy to research, apply, and qualify for.

In this guide, we’ll explain how you can secure a line of credit for your business, how you can keep an eye on your balance and its implications, and how you can minimize the risk of taking out great amounts of money to keep your business moving. As scary as credit can be, it’s a real resource in a good setting. Read on to learn more about how an unsecured line of credit can help your business.

An unsecured business line of credit is available from a number of major lenders within the United States and internationally. Major banks such as Bank of America and Wells Fargo both offer such a service to business owners, with a few small requirements. Among these are typically the existence of your business for four years – a simple metric that proves it’s a working, profitable formula.

There’s also the requirement of a certain set revenue level, often measured on a quarter-by-quarter scale. This allows lenders to check that your business is able to invest your line of credit into new business opportunities, while still having a strong revenue base to build on. Many lenders will also need your business to undergo a credit check, and to investigate your past invoices.

Generally speaking, most major lenders will issue an unsecured business line of credit for amounts of less than $100,000. This is to minimize the initial risk in lending to businesses, as making a large loan – which is, in effect, what a line of credit is – to a new business is fairly risky. It’s still enough for your business to expand substantially, however, and is designed primarily for small businesses.

As these are unsecured lines of credit, there’s no requirement for collateral or other security types for your lenders. It’s important to remember that this makes an unsecured business line of credit a fairly risky proposition for the bank or independent lender, and less so for yourself. As such, it’s a common practice for the application process to be fairly lengthy, in order to show you’re secure.

There are often small fees associated with applying for and receiving an unsecured business line of credit. These include a base fee, which is paid when the line of credit is opened. This is typically an administrative fee, and is rarely more than $150 in total. There are also often fees applied to any and all repayments made on the balance, particularly those that are made beyond their deadline.

For larger businesses, a range of different credit lines are available. These are, by and large, not as risk-free as an unsecured line of credit, and have much more stringent requirements. These include large, million-dollar business loans, eight-figure lines of credit, and other credit offerings designed with the large, multi-office business in mind. For small businesses, these likely aren’t appropriate.

As with any type of loan or credit line, it’s important that you remain aware of the possibility of your balance growing out of control. While there are more stringent requirements on loans for a businesses than there are for personal loans, they remain a risky, often difficult, investment. It is best to stay clear of shady or otherwise pushy lenders, as they often offer poor overall deals.

While somewhat risky, it’s important that your business has adequate access to credit for growth, everyday cash flow, and innovative investments. As such, an unsecured business line of credit is a smart, scalable, and effective solution. Avoid the risky merchants, work only with lender that you personally trust, and investigate thoroughly, and you’ll enjoy years of stress-free business credit.