A business line of credit can be used very much like a business credit card, and it has the same degree of flexibility, in that it can be used to cover the cost of any type of business expense. Also like a credit card, you would be responsible for paying some amount of money back each month to restore your credit line, after which it could again be used. Here are some of the particulars about how a business line of credit works.

Unsecured Business Lines of Credit

There is no hard asset which backs this kind of credit line, which means you don’t have to provide any collateral in order to be approved for the transaction. In some cases, it will call for a general lien which is imposed on your business assets, to provide some level of protection for the lender. You can always expect that there will be a higher interest rate applied to an unsecured business line of credit, simply because the lender is exposed to a higher level of risk of default.

Secured Business Lines of Credit

In this type of business line of credit, some specific asset will be providing collateral to the lender, in the event that you default on your line of credit. That allows the lender to offer a lower interest rate, because the lender is not exposed to such a great risk of default. When the borrower is unable to pay an outstanding balance on the line of credit, the lender will have the right to assume ownership of the specified collateral, and sell it off to secure repayment for the loan.

Interested in Business Lines of Credit? 

Having a business line of credit is one of the most flexible forms of financing in existence, and most businesses would benefit greatly by having one. If you’re interested in applying for a business line of credit, contact us at Commercial Capital Finance, so we can discuss some options.