Most businesses would benefit greatly by having a line of credit available to them, because of the tremendous flexibility provided by having a line of credit. Used very much like a credit card would be, a line of credit can be used to make many kinds of business purchases, cover payroll needs, purchase inventory, and even to pay suppliers for raw materials.
Any money which is drawn against your line of credit can be repaid on a monthly basis so that you will then have most or all of your balance still available to you. Choosing the right line of credit is something that should be given a great deal of consideration so that you can make sure you have the line of credit which is most advantageous to your business, and which doesn’t unnecessarily constrict your operations.
Secured Line of Credit
A secured line of credit is one which requires the borrower to put up some kind of collateral or assets in order to be approved. In many cases, these assets tend to be accounts receivable or inventory, rather than real estate or big machinery used by your company. Because the line of credit itself is secured, interest rates tend to be lower, since there is less likelihood of default by the borrower.
Unsecured Line of Credit
Obviously this would be the preferred kind of credit line which most businesses would like to apply for, since no assets must be pledged to cover the loan. However, this is always a more difficult kind of line of credit to secure for that very reason, and it leaves the lender in a more vulnerable position. In order to close the gap on that vulnerability, a lender will generally have stricter requirements for approval, such as solid business performance and good credit history. An unsecured line of credit will also generally carry a higher interest rate, since the lender is more exposed to the possibility of default.
Seeking a Business Line of Credit?
If your company would benefit by having a business line of credit, and most companies would, then you should contact us at Ambition Funding Solutions. We’ll be glad to discuss eligibility requirements so that you can begin enjoying the financial flexibility of a line of credit.