Why Unsecured Business Credit May Be Just What Your Company Needs

An excellent financial tool for a creditworthy business


There is no such thing as a free lunch. Everybody has heard that one. The truth is that unsecured business credit is probably the closest thing you will get to it. 

It doesn't matter whether you have been in business for five weeks or five years, business owners often find themselves in the position of needing funds fast. In fact, sometimes a business owner might need fast cash at terms that are favorable to him.

Getting unsecured business credit is the best choice he could have in just such a situation. 

In a nutshell, unsecured business credit is that which is extended to a business based on their creditworthiness alone, and without any consideration of assets with which to secure the credit. For example, take a new business owner who has excellent credit, and might even have a reputation as having been successful in past business dealings. If he or she decides to open a business, they might qualify for an unsecured line of business credit with which to start a business, despite the fact that they have no business assets to declare as collateral.

Unsecured business credit is considered to be a very risky proposition for a lender, but in certain circumstances some lenders are entirely too glad to lend on these terms, especially since with this risk comes a higher than average price for the money.

This is another good reason to maintain a good business reputation in your community. The truth is that banks are required by law to extend their assets in the betterment of their community.

Unsecured business credit is often a good option for individuals who do not have enough equity in their homes to qualify for a traditional loan.

Unsecured business credit is usually set at a fixed interest rate and is due at the end of a period that is agreed to prior to the credit being granted.

There are two primary types of unsecured business credit. The first is that which is granted by a bank. This type requires a lot of paperwork in order to qualify. These documentation include tax returns for both business and the individuals who are the primaries, bank account information, business registration information, and more. It is also important to note that after an unsecured credit line is granted, there is often an annual review to ensure that goals are met that would keep the credit intact. Despite the fact that a traditional line of credit offers benefits such as check writing, it also tends to be a more difficult type of credit type to obtain since there is more risk involved in the action.

It's also important to note that the economy can raise havoc with unsecured business credit. In fact, according to the Small Business Administration, almost 30 percent of business owners have had their credit lines reduced in the past four years. Further, one in ten have had their loans called in by their bank.

Despite this, unsecured business credit can be an excellent tool to have in providing funds for a business, since not only is it flexible, there are also high credit limits available, and business owners can have fast access to cash when they need it.

Just as is the case with other funding options, there is a downside of a business accumulating debt in the process of using unsecured business credit, but if it is managed effectively, this can be a small sacrificed when compared with its advantages. 

What kind is best for you? That depends. What one business owner might consider to be an advantage, others might call a disadvantage. Indeed, all business credit is a two-edged sword. Regardless, business credit and how it is managed is not only part of being in business, but it can be an enormous asset to managing and growing a business at any point in the life of that enterprise.

Business credit is tool, among many available tool, for a business owner to use optimally. So whether you are looking for a means of starting your business, maintaining it, or looking for a way to finance your next business leap, unsecured business credit can help you get to where you want to go, probably faster than you ever thought possible.