When your business needs access to capital, you might believe your only option is to take out a loan from a traditional lender like a bank. Unfortunately, not all applicants will qualify for such services. Whether you’re dealing with a low credit score or you lack the down payment required by the lender, it can be helpful to explore alternative solutions. For many borrowers, unsecured credit lines are a perfect answer. Review this information to learn more about this service and see if it is the right fit for your current financial situation.
What Is a Credit Line?
A credit line of this nature is quite straightforward. Basically, a lender will offer you a line of credit that you can access whenever you need extra cash. You are only required to pay back the portion of the credit line that you use, as well as any interest that accrues before the balance is paid in full. Unlike a loan, which is a lump-sum payment of a set amount, you can continuously use your credit line as long as there are funds available. You will also not need to put forth any assets in order to obtain the line.
How Do You Apply for a Credit Line?
The first step in applying for unsecured credit lines for your business is assessing your eligibility. While you won’t need a perfect credit rating with most lenders, you will still need to prove financial responsibility. The lower your score, the higher your interest rates are likely to be. If you have an impressive credit history, borrowers will often offer higher credit limits. On average, the maximum amount you can access on an unsecured line of credit is $2500. However, this number can be influenced by several factors like the state your business operates within.
What Should Borrowers Know About Credit Lines in Advance?
Though a credit line offers a number of advantages, you should review a few basic details before submitting your application. For one, it is important to understand the repayment terms. Knowing when a lender expects you to make a payment can help you plan ahead with your finances. Additionally, review the details surrounding interest rates on purchases versus interest rates attached to cash withdrawals. Many lenders charge higher rates for withdrawals, so take note of these numbers in order to avoid accruing more debt than you expect.
While a traditional bank loan might seem like the best fit when your business needs access to cash, alternatives like unsecured lines of credit can often prove much more appealing. Review the details surrounding this service, find a lender that works for you, and get the funds you need to keep your company on the right path.