Secured Business Line of Credit Explained

What is a Secured Business Line of Credit?

 

Suppose you own your own small or medium business; there may be instances where you have to pay an unexpected expense, finance a marketing campaign, manage cash flow or increase your inventory. In such circumstances, a secured business line of credit is a smart choice and can be a preventative measure from your business failing.

Related: Unsecured Business Line Of Credits

Using a secured business line of credit requires the business to pledge specific assets to secure the line. The lender may accept accounts or inventory that are receivable as collateral. It is rare for the lender to ask for significant assets like real property or equipment. If the business cannot pay off the line, the lender will take the collateral and liquidate it to pay off the outstanding balance.

 

Benefits of a Secured Business Line of Credit

 

Here's a breakdown of how a secured business line of credit could work for you and your business.

 

  • Secured Lines of Credit Usually Have Lower Interest Rates:

A secured line is backed by an asset, therefore, making the lender's risks lower. Lower risks result in lenders offering more affordable interest rates. 

 

  • Access is Flexible:

A significant advantage of a secured line of credit is the flexibility it offers. Once approved, funds can be withdrawn as needed.

  • Builds Your Business’ Credit: 

A business line of credit can aid in building a credit history for your business. If boosting or maintaining a good credit score is an option for you, receiving a secured business line of credit is an excellent way to achieve this goal. Once the credit line is used carefully and repaid on time, your credit score will reflect just that.

  • Pay for What You Use:

Depending on the arrangements that are made with the lender, once you receive a credit line, you pay interest based on what you use. This means that you pay for expenses as they come, rather than paying a lump sum as you would with a small business loan.

Requirement for Application:

  • A credit score/Fico of 700 or more to qualify.

  • 3 or more years in business.

  • Monthly revenue of $25,000 or more.

Whether in times of growth, or a fast-paced changing world such as the one we live in, every business should be able to adapt. Access to flexible terms and readily available cash is an ideal solution. The secured line of credit keeps borrowing costs at a minimum.

A secured Business line of credit is an excellent option for small and medium business owners because of the access to the capital you can draw upon when needed, the lower risks, lower interest rates, and the ability to keep your business running smoothly.

Are you looking to apply for a Secured Business Line of Credit for your small or medium business?

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