Getting unsecured credit is essential to every new and small business. Having lines of unsecured credit makes accessing extra capital for purchases so much easier than fighting through red tape for banks loans for extra funding. Additionally, utilizing unsecured credit goes a long way toward boosting business credit ratings, which opens the door to larger forms of commercial and alternative financing with more competitive terms and rates than traditional bank loans. However, new and small business owners frequently do not have the financial qualification to immediately get access to unsecured credit through conventional carriers, but there are alternative routes entrepreneurs can take to get access to unsecured lines of credit without going into the red.
The Traditional Path to Unsecured Credit
Much like with personal credit, starting out with a low score and a short financial history can get business owners access to secured credit. Secured credit is directly tied to the amount of money in the business bank account, but by using the secured credit card for upwards of a year, entrepreneurs can “graduate” to an introductory credit card, with prohibitively high interest rates. After using the introductory card for a while, business owners may be able to get access to unsecured cards with higher spending limits and lower cards. The drawback to this method is the time, low spending limits, and high rates are not conducive for business growth.
Asset-Based Credit: An Entrepreneur’s Best Friend
This form of revolving credit is built around the value of things such as real estate, vehicles, equipment and receivables, which are owned by the business. This line of credit can be drawn upon for purchases and investments of any kind. The biggest benefit of this type of financing is that the line of credit increases as the business acquired new equipment and real estate, and also as the amount of receivables grows. Please note leased equipment is not considered an asset, and cannot be figured into the amount of credit available.
Unsecured Credit through Alternative Lending
New business owners can rejoice. There are even special unsecured credit lines for new businesses that have been in operation for under two years. These unsecured lines of credit are structured around the current business credit rating, and sales, as well as other factors which can be used to increase the spending limit. This method offers lines of unsecured credit starting at $25K and can go up to (and beyond) $100K.
If you would like to learn more about unsecured lines of credit, or if you would like to explore other debt-free financing options for your new business, call Perfect Alliance Capital at 847-851-2223. We work with new business owners to ensure their success. We do not extend credit to entrepreneurs who do not meet the qualifications, but we offer such a wide array of commercial financing products, that we have something for everyone, regardless of credit ratings and financials.