Unsecured Lines of Credit

The major assets of the borrower are not subject to seizure. This means there is a higher risk for the credit-based financing entity.

Due to said risk, unsecured lines of credit are hard to get approval for. This becomes a hurdle to businesses that want to open up new lines of credit for the expansion of business working capital. Revenue-based funding is used and borrowed with the promise of future business returns. The lenders usually consider applications from companies who have built good reputations as debtors.

Equipment secured lending reduces the risk involved by keeping the amount they provide within a certain limit and keeping the interest rates high. This is one of the reasons why the APR over credit cards are higher than from other sources. Credit cards are technically considered as unsecured lines of credit, with parameters that are represented by credit limits. Note that there are no assets pledged over a card account, which means if you miss payments, there are no assets that the issuer of the credit card can seize. However, unsecured business l1nes of credit have the advantage over loans that they are more flexible.

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