Most small business owners would be thrilled at the prospect of having a business line of credit available to them. The trick is in finding which specific business line of credit is best for your company because not all of them are created equal. Probably the most difficult business line of credit to obtain is the traditional credit line because a great deal of documentation is required to support your application.
Assuming you even qualify for a traditional line of credit, it’s very likely that your account will be reviewed annually, after which time your credit line may be reduced, or the line of credit could be called in early, terminating the agreement with your bank.
Secured Lines of Credit
A secured line of credit mandates that the borrower must offer some of their assets as collateral for any loan. This being a temporary liability, the lender is free to accept Accounts Receivable, inventory, or other transitory assets as collateral. For the most part, a lender would not seek to engage large machinery or equipment as collateral, nor would they seek real estate property as part of their surety arrangement with you.
Unsecured Business Line of Credit
The majority of small business owners seeking a line of credit prefer to apply for an unsecured business line of credit, simply because it does not involve posting any kind of assets to be used for collateral. Unfortunately, this provides far less surety for the lender, so the lender is much more likely to insist on strong business credit, robust revenues, and a relatively long business history which shows stability.
In addition, an unsecured business line of credit will generally have a lower credit balance, and will also have a higher interest rate attached to it. Because these types of credit lines are far riskier for lenders, any small business being granted an unsecured line of credit can expect to pay more for it, and to have a smaller credit balance.
Lines of Credit with Monstera Lending Group
If you’re seeking a business line of credit, we at Monstera Lending Group may be able to provide the assistance you’re looking for. Contact us today, so our specialists can work with you on possibly providing the business line of credit you need.