Why Entrepreneurs Need Unsecured Business Lines of Credit
If you need to borrow money to help cover business costs, chances are you’re in the early stages or dealing with either growth or hardship. All businesses encounter these situations and borrowing money is a necessity for most companies. What’s difficult for many entrepreneurs is getting past times of financial strain without further complicating things by tying up collateral in the terms of a loan. This is what makes unsecured business lines of credit the optimal choice for so many business owners. With the right approach and financial history, money can be made available without first demanding you put assets at stake.
Launching Your Company
Opening a business is a huge investment. Well before a product is ever sold, most business owners have already sunk thousands and thousands of dollars into their operation. The trouble is, all this money is needed before you have any paying customers. This means you have no accounts receivable or invoices that you can factor or use as collateral, so a loan needs to be obtained based off of credit and future prospects. Unsecured business lines of credit don’t require any form of a guarantee, making them ideal for startup owners who have a history of making payments on time and doing well by lenders.
In addition to skirting the collateral issue, having a line of credit is also one of the best ways for entrepreneurs to access their borrowed funds. Instead of dealing with one giant loan, you can pull as much or as little money as you need from your available credit line and then you’re only responsible for reimbursing the money you spend. This allows business owners to cover various costs on their own schedules and pay the money back as they go.
Covering Growth and Change
You may reach a point where your business is on the verge of growth but overleveraged. If you aren’t in a place where you can put up collateral, unsecured credit can help cover the cost of expansion without further stressing your cash flow. The same is true during an off-season or a rough patch; using your good credit instead of valuable assets, you can secure the money needed to bridge the slow times to later periods when you expect better cash flow.
All entrepreneurs should plan on borrowing funds at one point or another. Depending on the particular situation, the best options are often unsecured business lines of credit that allow access to funds without requiring collateral as part of the terms.