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Unsecured business credit is an option that you should strive for in your business. It is essentially a type of financing that you don’t need to secure with collateral. One of the most common types of unsecured credit is a business line of credit.

What It Is

A business line of credit works like a home equity loan. You are given a credit limit from the lender. You then can borrow as little or as much as you need up to that limit anytime you want. You pay it back in monthly installments as with any other loan. However, the best part is that until you borrow the maximum amount, you don’t acquire interest or have to make payments.

Benefits

One of the biggest benefits of unsecured business credit is that you don’t have to put any assets up to secure the loan. This makes is very low risk for you. In addition, you can use it or not, so once you establish it, it is just there ready to use if the need should arise. It is a backup source of funding that can come in handy if you find yourself in a pinch. It is basically like having an emergency fund on hand.

Another benefit is that it helps your business to establish credit. This is something tricky to do when you are first starting out, so anything that will help you with it is a perk. You are able to use it wisely to show that you are a good risk for lenders in the future. A side benefit to this is that you are better able to separate yourself from the business so your credit no longer is in play when securing funding or entering into other financial contracts.

Lastly, a line of credit is great because of the payback terms. If you don’t use the credit line, you don’t have to pay anything. Even if you do use a small portion of it, you won’t have to pay. Only when you reach the maximum balance will payments kick in. This gives you a lot fo flexibility. If you only need to borrow a couple hundred dollars, you can borrow it and wait to pay it back when you have the money on hand. The pressure is off of you to try to pay back when you may still be having financial struggles.

Unsecured business credit is something that every business should have. It is flexible and easy to use. It offers many benefits that can really help you to manage your business’ finances better.