Increase Cash Flow with Unsecured Lines of Credit
An unsecured line of credit is a financial tool used by business owners to gain access to ready funds and increase cash flow. These funds can be used for a variety of purposes including, but not limited to, payroll, inventory or other unexpected expenses. Here are some of the benefits of unsecured lines of credit.
No Collateral Required
With traditional term loans, borrowers are often required to put up major assets as collateral. In the event of default, the lender can seize these assets. An unsecured line of credit does not require collateral and the borrower will not have major assets liquidated because of delinquent payments. This does mean that you will likely face smaller limits or higher interest rates to help mitigate the risks to the lender. It also means that lenders will expect good, established credit before approving you for a business line of credit.
Credit is Revolving
One of the best advantages associated with a business line of credit, is that the available cash renews as you pay the balance. With traditional term loans, once the loan is paid that cash is no longer available to you to use, but with unsecured lines of credit you can access that money again as you need it to boost cash flow. These business lines of credit will have a maximum dollar allowance set by the lender that you can borrow at any one time.
When you take out a term loan, the cash arrives in one lump sum, and it is usually marked for a specific purpose with planned, fixed payments. An unsecured line of credit, however, generally doesn’t require the funds be appropriated for a particular purpose and will allow you to take only what you need as you need it. Payments can be made towards only the interest or in varying amounts to pay down the balance, and unlike a loan, the unused portion does not accrue or carry any interest. As long as you make regular, on-time payments you can pay more or less as your business situation allows.
Business lines of credit are a great way to get access to working capital for your business. Unsecured lines of credit can boost cash flow and work as a safety net in the event of unexpected business expenses. If your business could use more funds to help your business grow, consider applying for an unsecured business line of credit.