Unsecured Business Credit: Why It’s Essential For Startups
When you are starting your business, you need access to many different funding resources. Unless you have the cash flow to cover all of your anticipated and unanticipated expenses, which most people don’t have, you’ll need to tap into funding elsewhere. Unsecured business credit is a helpful tool for small business startups; in fact, many financial experts agree that it is essential. Here’s why.
Unsecured Means No Collateral
As with your personal credit cards, an unsecured line of credit means you do not have to back up the funding with collateral. This is important when you’re just starting out, because you don’t have many, if any, assets to use to support the loan. This financing source is given to you based on your creditworthiness, so you don’t have to worry about leveraging parts of your new business for the cash.
Better Interest Than Personal Lines
You will have to pay an interest rate on the funds, but these percentages are much lower than a personal credit line. Unsecured business credit issuers understand that you are opening a new shop, so you need a little time and a lot of help to establish your positive cash flow. Offering credit with a lower interest rate is one way these lenders can help you keep some of your profits for yourself.
No Payments Until You Use the Money
If you secure the credit line but don’t tap into it right away, you won’t owe any monthly payments. The beauty of this funding source is you don’t owe the issuer anything until you use the money. If you don’t need to tap into your line of credit for years, you won’t have a monthly payment plus interest on your books, but you will have a liquid asset, which makes your financial reports look that much better.
It’s There When You Need It
If you do end up needing to tap into it, it’s there. It won’t go away. In many cases, the issuer will be with for the long haul, meaning you will have this line of business credit for the duration of your business. This provides you with a security net for unexpected financial issues, including losses or unanticipated operation stoppage. No matter what you need the money for, you’ll have it.
Unsecured business credit is a valuable tool for a new business owner’s financial arsenal. Alongside other sources of funding, this money works well to set up as a cash flow source for your startup or unexpected financing needs.