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Which Unsecured Business Lines of Credit are Best for Your Business?

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Which Unsecured Business Lines of Credit are Best for Your Business?

By Marco Carbajo, Guest Blogger
Published: May 21, 2014

Whether you’ve been in business for a couple of weeks or five years, access to cash is a crucial element of survival for a business. When the going gets tough, a business can fail unless it has access to cash on demand.

For business owners, getting unsecured business lines of credit is by far the best choice for having that cash on demand. The fact is that business owners want access to funds – whenever they need it, at a competitive rate and with flexible payment options. The National Federation of Independent Businesses says, “Think of it as an insurance policy that never needs to be paid until you need it.”

It’s important to note there are two main types of unsecured business lines of credit one needs to consider: traditional and non-traditional.

So how do you determine which one is best for your business?

The traditional business line of credit issued by a bank calls for a substantial amount of documentation in order to qualify such as financials, personal tax returns, business tax returns, bank account information, business registration documents, etc.

In addition, once a line is issued an annual financial review is required to maintain the line of credit. While a traditional credit line offers various benefits such as check-writing privileges, it tends to be the most difficult line of credit to obtain and maintain.

In a recent survey conducted by the National Small Business Association, “29 percent of small business owners report having their lines of credit reduced in the last four years and nearly 1 in 10 had their line of credit called in early by the bank.”

In my opinion, a non-traditional line of credit in the form of business credit cards are the best unsecured business lines of credit a company can get. It provides the fast access to cash and payment flexibility associated with a traditional credit line but without all the drawbacks.

Qualifying for this type of revolving credit line is FICO® driven and doesn’t require the yearly reviews, excessive documentation and level of scrutiny that comes with a traditional credit line.

Some of the advantages of non-traditional business lines of credit are as follows:

1) Access to cash quickly – With unsecured business credit cards, you can utilize as much or as little credit from your line as you want to, anytime and anywhere

2) High credit limits – Business credit cards carry high credit limits, making it extremely convenient to finance larger business purchases. Many cards even offer 0% APR for the first 12 months.

2) Flexibility – With business credit cards you have flexible payment options compared to a fixed month-to-month payment that comes with a business loan. When you tap into your credit line, you have three options every month. You could pay the full amount due, pay at least a minimal portion of the balance or pay greater than the minimum amount due.

3) True separation – Business credit cards enable business owners to separate personal and business expenses while benefiting from business credit reporting. This makes it possible for business owners to establish the creditworthiness of the business itself.

4) Personal credit protection – Small business credit cards that report solely to the business credit agencies allow business owners to protect their personal credit ratings while building their business credit.

While a non-traditional business credit line provides all the convenience and flexibility a business needs, there are some negative aspects to consider. The major drawback is the ability for a business to accumulate debt. Without a fixed payment schedule, business owners may be tempted to simply pay the minimum monthly payment on its outstanding balances. By carrying debt, compound interest can really add up, especially if a company carries large balances.

No matter what type of unsecured business lines of credit you decide to obtain for your business, it’s crucial to manage any debt responsibly. Traditional and non-traditional business lines of credit are essential tools for any business to have in its financial arsenal.

About the Author:

Marco Carbajo
Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.


Well done and thanks again Marco, Sorry for the length of this comment. I believe in this loan, its lenders, and the great benefits it can do for the 8,000 businesses the banks deny each day. Thank you Marco for once again enlightening us. The title asks which line of credit (or bundle of credit cards with high limits) is best for business. Marco has it for the alternative lines of credit. That is better than tradition by far and away. The alternative does not require the negatives. Those being financial security, such as collateral, or investment in the business. Also, requirements of financials are entirely avoided, not just less of them. While the traditional does ask and for financials and all of them. Also, avoided is the annual review the traditional line of credit requires. This annual review has led directly to the reductions of trade lines and the nastiest bad faith move, 1 in 10 have their trade line called. Meaning the loan must be repaid in full immediately. That could be up to $200,000 for lenders I am aware of. Who has even $50,000 saved up? According to estimates, retirement savings of the typical American family, savings are less. So one in ten are not likely to be able to repay even half. Unless they were wealthy, or their business was very successful and funds available. But that isn't likely. The bank wouldn't call in the loan if one had enough to repay the loan in full. Lenders don't disclose that they pull one's credit, monitor bank accounts including personal, and retirement savings. So when the borrower is unable to pay the loan in full, the bank knows this. Call the loan in to get what little there is or much if $100,000. He or she got nervous and started to think worse case scenarios, and grabbed what he could and threw the borrower under the bus. Likely caused the business to fold. For having to go to the bankruptcy court for relief. The nontradional lines of business credit cards not only have no review yearly, they use cash. Which the bank has no way of knowing of that transaction. That is privacy. It is likely that the nontraditional line of credit is not as concerned and rarely reduces the credit limit or call the loan in. Why, because they not only don't ask for financial galore like the traditional lender does, they never ask for financials. They are state only. Even more relaxed they are evident by the fact they have approved our borrowers who had absolutely no income or assets. Marco state the loan is Fico driven. This can be missed or not fully realized how absolute it is. The only two requirements for our lenders is a 680 fico and an entity formation, an LLC. Inc., etc. You would think the default rate would be excessively high. But this loan has been funding for many years and increasingly. The rate of increase of submissions has been increased by approvals. Keybridge reported that for every $1,000 of credit invested in one's business $5,000 in revenue was the result. Not only is nontraditional financing the better of the two. The lenders clearly are different too. Again, the negatives are avoided and the positives are greater. One can make your business have cash available for a rainy day. The other makes the rainy day occur or has a fear that it will come and stay very long. This alternative bundle of high limit credit cards not only is the better choice, one should attain it for it's great financial benefits. As long as the minimum monthly payment is made, and the balance does not go over the limit it is likely one can use this card till one dies. He may have large payment and high fee, that compound. But at least he can make minimum payments on the, and his lender won't force him into bankruptcy for relief from the lender. Also, this often is a loan that is the first time one has paid with a business loan, not with personal financing. Paying with personal assets creates liability of one's business the liability for one's personal assets. Most loans fold by year five. There are 8,000 denials by banks every day. How many of them will use personal assets for ones business has to be significant. If half, then 25 billion in loans will end up in not just business bankruptcy but sadly in personal bankruptcy too. If they could learn about this loan, they would not have personal liability. They would not lose their home and more. This loan leads to two others in one year that I know of. The third loan is so beneficial as it is an SBA loan but easier to attain, and it signals that one has made the elite level of creditworthiness. The score goes way up. Other lenders start sending prequalifications also SBA backed. If one is not reckless, one will likely have financing to weather all storms and be one of the %10 who make it past year five. Please get to know Marco and me and let us help you attain this loan. Not just for you and those you love. To the general public. The more the better. Again, the detriments are avoided, and the benefits are increased. Instead of bankruptcy, one will have a healthy retirement from the wealth generated and attained when selling one's business. Remember, one only needs a 680 credit and an entity formed $250. up to $200,000 cash, used for any business or business investment purpose. No income or assets are required. When one has them the state them and are never asked to prove them with statements. There is no yearly review. These lenders have been and are very profitable with this loan. The surely do no lend in fear. They will have good faith in you from the start and until the loan ends. They get money at zero percent from the government. Charge starting at %9.99. That is a healthy return. It mitigates losses and increases the balance sheets. Long live this loan and lenders. Wes Wes Graham American Finance and Lending
I am a Kenyan by nationality, looking for an US citizen person willing to partner with me in a water processing company in order for me to qualify the OPIC loan. Is there any way you can assist me to get one? Can I get credit facility to the tune of US$ 6,000,000 with a flat rate interest of 8% per year to be repaid within three years with one Year Grace Period and a US business partner to stay with me in business for six Years? Please help me out. I want to start making preparation of future oil mining and Iron Ore, Silver Ore, Gold Ore, Copper Ore and Manganese Mining. These Minerals have been found here in Kenya. Please get me a US citizen business person to be my Partner.
The fast and easy benefits of credit cards comes at a high price as they typically charge a significantly higher interest rate in comparison to a working capital product. Also, interest can steamroll into a mountain of debt if it is not repaid in full and on time every month. I would recommend looking at other options and do a full comparison of the pluses and minuses. Also one should take into consideration the personal liability and other downsides which one should considering carefully. Do your due diligence.
Unsecured business lines of credit seems to be another option in hand where financing can really be easy with flexible repayment mode. Believe such opportunities needs to be grabbed with both the hands before its too late.
I have recently used Crowd Funding to raise debt for one of my businesses - I found it to be significantly easier than the traditional routes for raising finance and a lot faster. You do need to have a track record already and cash flows. I know that this type of crowd funding is available in both the UK and US.
I'm not sure that unsecured business credit cards don't have more drawbacks than what you describe. It risks setting you up for increased debts to stay afloat. Debt that accumulates. I much prefer traditional business credit lines.

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