Key to any startup is maintaining cash flow. Of course, if you are new, getting startup funding for your company can be difficult because ….. you and/or your new venture are new and have no track record. Bit of a catch 22 situation there.
However, something you may want to think about is unsecured loans are loans that do not require any cash down, home equity, personal assets, or business assets of any kind. Obviously, unsecured lending is a valuable option for startups which have property or assets that they want to protect. Should you default on the loan and it’s unsecured versus secured, your property and/or assets will be protected from any liens… now while these are attractive, can you really find such an animal?
Without a doubt, an unsecured business line of credit is probably the most valuable financial tool that a small business owner can possess. Essentially, the credit line works like a huge credit card but at times can have added benefits like check writing and lower interest rates as compared to most business credit cards.
An unsecured line of credit loan is extended by banks or other types of lenders. The amount of the credit line offered is based solely on the creditworthiness of the company and does not require a personal guarantee. Even though unsecured business lines of credit have been in existence for many years, it still comes as a surprise to many small business owners that the program exists or that their company can even qualify.
One typical, and smart question that you should ask yourself is why would banks make an unsecured line of credit loans? The answer is simple. Banks and other lenders are already making unsecured lines of credit to you as an individual. Why should not they offer a commercial program? So in reality, it is not nearly as big a stretch as most people think.
If you think about it, almost every American carries at least one Visa, MasterCard or American Express credit card in their wallet or purse. I know in my wallet, with multiple businesses + personal, I carry 8 credit cards at a time. In this case, then one way to think is that the total of all the credit limits on all the cards is your total line of credit. Now, we do not advocate going out and rapidly blowing that but change a way to change your perspective on things.
The credit cards and the limits on each is issued to you based on your creditworthiness as an individual and are totally unsecured. Therefore, it makes good business sense to offer an unsecured credit line program to corporations. In fact, corporations could have viewed as more stable than an individual and are more likely to use the lines more frequently. When you are a startup, of course, this gets a little tricky and requires some unique techniques above and beyond the scope of this article.
But, if you have a startup and are looking for capital credit lines, you should really look down this path. Fortunately, just like your personal credit cards, you only pay for what you use and for a new business, we suggest you play it very conservatively. However, when you get your credit line, it gives your business access to capital when you need it.