Unsecured Business Line of Credit

A line of credit is a flexible form of short-term financing that is not secured by any asset. This type of financing is also known as a “BLOC” or “ULOC” for Business Line of Credit or Unsecured Line of Credit. If you have ever had a HELOC (Home Equity Line of Credit), you are familiar with how this works. With a BLOC, your business will be given an amount of available credit which you can access as you need. With a business line of credit, you do not make any payments or pay any interest until you actually use the funds. Keep in mind however, that almost all providers of BLOCs charge a funding fee that can be around 10% of the amount of credit extended. So, if you receive a $150,000 BLOC, you will be charged $15,000, on which you need to start making the minimum monthly payments. In many cases, this is 2% per month. Some of our lenders have BLOCs with a first year interest rate of 0%, so any minimum payments you are making that first year go right back to increasing your available balance.

A line of credit is ideal for unexpected expenses so that you don’t have to rely on cash flow when emergencies arise. For instance, the money can be used to replace a major piece of equipment or to provide working capital during a seasonal decline in sales revenue. A line of credit could be in the range of $5,000 to $250,000 or more.  The personal credit of you or a “credit partner” in your business is important, as the overall credit line is determined by the personal credit rating of the person signing for the credit line.