Secured Business Lines of Credit

Business Line of Credit FAQs

• What is a secured business line of credit?

  With secured lines of credit, borrowers can access a revolving line of credit backing it with a valuable asset, such as inventory or real estate, which the lender can seize if payments are not made.

  This type of collateral often enables them to take advantage of higher credit limits. An unsecured line of credit typically accompanies a smaller credit limit. A lender may still ask for a personal guarantee or lien with an unsecured business line.

• What’s the difference between business credit cards and lines of credit?

  With a business credit card, you don’t have quite as high a credit limit, there’s no collateral, and cash doesn’t actually show up in your bank account. To get a cash advance with a business credit card, you may experience fees and higher interest rates.

  You may want to consider a business card for your business if you often need to make smaller purchases for your organization on a regular basis. Likewise, they can be a good short term solution for newer businesses establishing cash flow.

  A line of credit is a better solution for longer term, bigger projects and more established businesses.

• How does a business qualify for a line of credit?

  Lenders typically extend lines of credit to more mature businesses, at least six months of established history, and solid revenue (around $25,000 annually). Businesses usually have to provide traditional lenders with both business and personal tax returns, financial statements, and bank account information as part of the application process.

  Online lenders tend to have less rigid qualifications, but may offer lower credit limits.

• Will my business line of credit affect my personal credit score?

  Business and personal credit are different. Business loans are associated with your company’s tax ID. Personal loans are associated with your own social security number.

  Lenders look at your personal credit when you apply for a business loan to assess your creditworthiness. This is especially true for newer businesses who don’t have a business credit report.

  As with your personal credit score, making prompt, adequate payments on your business loans can affect your business credit score positively, and failing to do so can negatively affect it.

  Business loans affect your personal credit if you personally secure them.

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