Unsecured Business Credit

Most business owners wonder if unsecured business credit even exists. This type of credit is extremely difficult to obtain on large dollar amounts. Typically unsecured credit for businesses are small credit cards or credit lines. I have seen some lenders issue lines of credit that have been secured only with an SBA and personal guarantee from the owners of the business; however, it was in early 2009 when I saw the last of those credit facilities.

Be cautious if someone tells you they can get you an unsecured business credit instrument. Often when bankers make promises that are outside of the industry standard, they typically are never fulfilled. Make sure you do your due diligence and don’t get too excited until the credit facility closes and funds.

Businesses that keep strong cash balances with their lender may have more influence in obtaining unsecured credit. In these cases a lender will assume that the existing account balances will remain strong in the foreseeable future and would be available to mitigate the risk. Your banker will most likely revoke the credit line if your cash balances decline significantly.

Unsecured credit for businesses will probably be seen again at some future date; but, in our economic climate, and as a result of past credit delinquencies, it is safe to say the rules for obtaining unsecured credit have changed.

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