Secured vs. Unsecured Business Line of Credit: What’s the Difference?


The reason that 26 percent of people start their own business is that they want to be their own boss. A business line of credit can be a big help in making you successful at being your own boss.

It is one of the easiest ways to ensure that you always have cash on hand should you need to make quick purchases for your business or even to do any investment.

A line of credit provides a cushion for your business. There are two main lines of credit, they are secured and unsecured.

What Is a Business Line of Credit?

A line of credit is an open-ended loan. You can use this loan for any purpose that you want. In many ways, it is similar to a credit card because it is a revolving loan.

You can use the line of credit as many times as you want. There is a limit on the amount of money you get but there is no expiration date on it.

Secured Line of Credit

Whether you want a small business line of credit or a line of credit for a larger business, secure lines of credit are available.

When you get a secure line of credit, the assets of your company will be used as collateral and they can be seized if you fail to pay off your debt.

The advantage of getting a secure line of credit for your business is that the bank usually gives you a higher credit limit because they are more confident about getting the money back. The interest rates will also be lower.

Unsecured Line of Credit

When a lender gives your business an unsecured line of credit they are assuming greater risk. An unsecured line of credit is a lot harder to get.

Often an unsecured line of credit is only given when the company is well-established and has a good reputation. The lender will often compensate for giving an unsecured loan by offering high interest rates.

If you are looking for an unsecured line of credit, the experts at Alto Capital can help you achieve your goals.

The Benefits of Secured and Unsecured Lines of Credit

The biggest advantage to getting these types of loans is that you can use them repeatedly and you will not have high minimum payments. You also do not have to pay in full as long as you keep your payments up-to-date.

The flexibility in accessing and repaying a business line of credit is a major advantage, even if the business line of credit rates vary.

Get a Loan

The business line of credit that you can access is directly related to the type of business that you have. It is up to you to look at your business’s needs and assets to decide which line of credit is right for you.

Whichever line of credit you choose make sure that you are capable of repaying, so that you don’t ruin your business’s credit score. If you want more financial tips, please visit the business and financial tips section of the website.