What is Unsecured Business Credit?

If you're looking for financing for business, you've probably encountered this term before. But like most people, you probably scratch your head at the thought of an unsecured business credit because you have no idea what it is.

Unsecured business credit, or unsecured business lines of credit, is an option that is available to small business owners. As small business owners, they are sometimes faced with the challenge of paying off their creditors or maybe even expanding their business. Understandably, getting a loan without putting up collateral in exchange for financing for business is always welcome. But considering that unsecured business lines of credit doesn't require you to put up collateral, it's relatively harder to avail of this type of loan.

Like most credits, your credit score will come into play. You'll have a better chance of getting an unsecured business credit if you have a high credit rating. You'll also have the chance to get better interest rates and payment terms.

Why is it called unsecured business lines of credit? Basically, you'll have a line of credit that you can avail of in times of emergencies. Let's say creditors are breathing down your neck for payments, you have ready access to funds that you can use. You'll have access to it even without collateral. That makes it unsecured.

Financing for business is complicated. You usually have to go through hoops in order to avail of additional financing. By the time you get it, it might be too late. That's why it's comforting to know that in times of emergencies, we have funds that we can use. Unsecured business lines of credit gives us the assurance that if the time comes that we need cash for our business, we don't have to worry because we have a business line of credit that we can take advantage of anytime we need to.

But because it's unsecured, it's usually more conservative compared to secured credits. You will be given a lower credit limit so you really can't use it to make very large purchases. It's designed to help your existing business along and not build from it. But come to think of it, it's actually better because it will prevent you from making very large purchases that you couldn't pay off later on. This is to your advantage because another downside of an unsecured business credit is the higher rates for interest and penalties.

But all in all, it's helpful if you're financing for business so it's something that's good to have. If you have high credit ratings and you want something that you can fall back on, get it. It will help you survive through tough times.

By Clint Steiner