Secured or Unsecured Line of Credit Business Loans – Which is Better?

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Posted on 30th December 2008 by Sandra Thompson in 1 |unsecured business loans |unsecured loans

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If you’re thinking whether to apply for a secured or an unsecured business line of credit, this article should be able to help you come up with an enlightened decision. To compare these two business financing options, let us first define what a business line of credit is. Then, let’s discus the basic differences between a secured business line of credit and an unsecured business line of credit.




Business Line of Credit and Business Loans

A business line of credit can be utilized for different purposes such as in purchasing equipment or machineries, launching projects, keeping a steady cash flow, buying stocks, and more. What makes it different from a business loan?

A business loan is given as a lump sum payment while a business line of credit can be taken out in installments. Within the given term or time period, a business owner can take out the cash amount he needs as long as he doesn’t exceed his credit limit or credit line.

Differences Between Secured and Unsecured Business Line of Credit

A business line of credit can either be secured or unsecured. An unsecured line of credit does not require any type of collateral so that it poses more risk to the lender. For this reason, unsecured lines of credit are often limited to a smaller credit.

On the other hand, a secured line of credit requires the submission of collateral as security for his debts. Typically, the business owner’s home or property is submitted as collateral so that the credit limit for secured business line of credit is higher than an unsecured line of credit. Other forms of collateral that can be used are the business’s accounts receivables or business assets.

Making the Choice

Regardless of what type of business line of credit you prefer, it is important to choose your lender wisely. Be sure that you are well aware of your payment terms. Take note of the interest rate and the other fees included in your agreement. Read and understand your contract before signing up any document.

Your credit standing can also make a big difference with the rates you’ll get. If you have a business credit, see to it that all your accounts are in good shape and that there are no past due bills in your credit report. If you haven’t yet established a business credit history, your personal credit history would be used instead.

Of course, lenders offer the lowest interest rates and the best deals to clients with impressive credit rating. If you have a problem with your credit history, it may be better to work on improving your credit first before applying for a business line of credit. You may need to wait for at least 6 months or so to see some improvement in your credit score. Nevertheless, if you can’t afford to wait that long, you may have to do more research to find a lender that offers reasonable terms despite having a bad credit.

About the Author

Sandra Thompson is a loan consultant with Unsecured Loans Now and has been providing consumers and business owners with Unsecured Loans since 1989. For years she has helped people with loan and credit problems especially pertaining to Unsecured Personal Loans, Business Loans and Unsecured Credit Cards. Copyright 2008.


Getting An Unsecured Loan or Business Line of Credit

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Posted on 26th December 2008 by Sandra Thompson in 1 |unsecured business loans |unsecured loans

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An unsecured business loan and a business line of credit are both viable options for business owners and entrepreneurs who need financial assistance. What are the differences between these two business financing methods? Which one is the more suited method of financing for you?

Unsecured Business Loans


For people in need of loan but do not want to submit collateral, an unsecured loan is an option. Nevertheless, the interest rates are considerably higher than those of secured loans. Most unsecured loan lenders also require a good to excellent business credit although you can find a few lenders who extend unsecured bad credit loans.

An unsecured loan is paid on a monthly basis with repayment terms ranging from 1 year to 30 years, depending on the loan amount. Although it doesn’t involve any collateral, a business owner must do his best to submit his monthly payments on time to avoid expensive late penalty costs.

Business Line of Credit

An unsecured business loan is given as a one-time, lump sum payment while a business line of credit can be withdrawn in installments. Within the loan term, the borrower can take out cash advances from his credit line as long as it doesn’t exceed the amount of his loan.
A line of credit also involves the submission of collateral. The value of your collateral will determine the total amount you can loan. Usually, the home property is used as collateral although other personal and commercial assets can be used as well. However, most business owners use their homes to secure the loan because of its high value.

What is the advantage of getting a business line of credit? This source of funding can be used to purchase new equipment or repair broken equipment, buy more stocks and supplies, hire more workers, or to sustain your daily operating costs. Because the funds can be taken out at any time without the need to apply for credit each time, it gives a business the financial assurance it needs.

Repayment often starts at the end of your loan term period. For instance, if you obtained a 5-year term, that means you can take out the cash you need at any time within that period. Payments are also submitted on a monthly basis.

Just like with business loans, your credit status can also affect the interest rates. A high Paydex score not only guarantees a fast approval of your application but also enables you to avail of the best deals.

Making the decision to get a business line of credit or an unsecured loan depends on your financial capability and your business’s spending needs. If you need a large amount of money, you may opt to get an unsecured loan.

However, if you need continuous financial support, you may consider a line of credit. Take note however, that a business line of credit is only offered for businesses that have been in operations for at least two years.

Copyright © 2008 Unsecured Loans Now

About the Author

Sandra Thompson is a loan consultant with Unsecured Loans Now and has been providing consumers and business owners with Unsecured Loans since 1989. For years she has helped people with loan and credit problems especially pertaining to Unsecured Personal Loans, Business Loans and Unsecured Credit Cards. Copyright 2008.