Benefits of Secured Line of Credit
Benefits of Secured Line of Credit
When a business takes out a line of credit, it will have to offer up collateral to secure that form of a loan. This collateral is basically a promise to the lender that they will repay the borrowed funds.
Easier to Qualify
When it comes to an unsecured line of credit, there is the risk that when and if you default on the loan, the lender will lose money. Remember, giving a personal guarantee or putting up collateral takes away the risk for that lending company.
If you have given the lender a way to be confident that they will get their money back, then they may be more open to doing business with you. Because of the varying assurances, you can provide, it can be relatively easy to be eligible for some kinds of business or secured lines of credit than others.
Better Interest Rates and Terms
Generally, lenders charge high rates of interest when they are working with riskier business portfolios. Why? Because by charging high rates, lenders end up getting back the costs of giving you financing through interest alone, which protects them against the possibility that you cannot repay them.
However, offering this form of a credit line is a relatively less risky affair than offering a personal one. Because of this, you may qualify for a line of credit with more comfortable terms and rates for your business.
