Every business will have a time (or several) when cashflow is low but they need to keep day-to-day operations moving. You know a big payday is coming when you finish up work for this client, or you just need enough to get through a slower period until business picks up again. An unsecured line of credit might be the solution to keep your business moving during the interim.
An unsecured line of credit – commonly called a ULOC – is credit for which you don’t need to offer collateral. The business receives access to money to cover short-term cash needs, similar to a credit card. Businesses pay interest on the amount borrowed, and the amount of credit available varies depending on how much is spent/repaid. Unlike a loan, there is no lump-sum dispersal with a repayment plan.
The terms of the unsecured lines of credit vary depending on the lender. Interest rates are variable, and the amount of credit ranges from $10,000 to $100,000. Credit lines greater than $100,000 will likely need to be secured.
An unsecured line of credit is a relatively low-risk solution that can make all the difference in helping a small business get to more solid financial footing, and it comes with many benefits.
Keep your assets safe with no required collateral
One of the key selling points of an unsecured line of credit is that a small business doesn’t have to risk losing any assets. In many cases, small businesses don’t even have the assets required to secure certain loans. Because no collateral is required, lenders approve small business applications for credit more quickly.
Interest rates that favor small businesses
While businesses don’t need to secure the loan, they of course still need to pay interest on any money spent. Because unsecured lines of credit are generally smaller and lower risk, their interest rates are favorable compared to more traditional business loans. They also tend to be lower than rates for business credit cards and cash advances.
Only pay for what you use
Unlike traditional loans, which require monthly repayments after an all-too-brief grace period, a small business doesn’t need to worry about repayment until they actually use the credit. As with a credit card, if the balance is paid in full and the business did not need to spend on their credit that month, they do not owe a payment.
Reliable access to capital when you need it most
No business wants to rely on emergency credit to get through a rough time, but if the situation arises, it’s nice to know it’s there. New small businesses need access to working capital to help launch their business in the rough time before it becomes profitable. When you have expenses that need to be paid for now, like payroll or the supplies that will get you through to the next client, you’ll be glad you have the unsecured line of credit.
Boost your credit rating
Businesses have credit ratings too, and an unsecured line of credit in good standing will help you improve your business’ credit profile. Even if you don’t think you need the credit right now, paying off a modest unsecured line of credit could help a young business boost its credit score.
Growing your business requires understanding all the financial opportunities available, and knowing which ones are right for your business. To learn more about funding options that benefit your business, contact Tenet Financial Group today.