3 min read. February 7, 2022 – by Amanda D’Auria
A business line of credit offers fast, flexible financing that can be put towards almost any type of business expense. You can use a line of credit to hire new staff, expand to a new location, invest in marketing, and so much more. Best of all, you’re under no obligation to use the funds right away. Simply withdraw as needs come up and you’ll only have to pay interest on what you borrow.
There are two main types of business lines of credit: secured and unsecured. A secured line of credit is backed by collateral or a personal guarantee, while an unsecured line of credit isn’t backed by anything. Most businesses would prefer a business line of credit without a personal guarantee – since these are less risky for borrowers.
Here’s the basics on business lines of credit without a personal guarantee and how to get one.
A personal guarantee essentially makes you a co-signer on your business loan. In other words, if your business is unable to pay off the debt, you as the business owner, will be held legally liable for the payments.If you have multiple business partners, a lender may require a limited personal guarantee. This type of guarantee assigns each owner or partner responsibility for a percentage of the debt.
If this happens, the lender has the right to claim your personal assets in order to recuperate their funds. You could potentially lose your home, car, or another type of property.
Personal guarantees add an extra layer of protection for banks and lenders. In case your business defaults, they still have a chance to recuperate their funds. As a result, some lenders may be willing to offer you better rates and terms if you agree to backing your business line of credit with a personal guarantee.
On the other hand, banks and lenders may be hesitant to approve you for a business line of credit without a personal guarantee because this funding type is more risky for them. If you’re trying to apply for this type of financing, know that your credit score, business history, revenue levels, and other criteria will have more weight.
If you’re willing to put up with higher interest rates in exchange for not being required to sign a personal guarantee, an unsecured business line of credit may be a good choice.
A business line of credit without a personal guarantee can be used exactly the same way as any other type of line of credit. This type of funding is flexible and can be put towards almost any business expense. Many businesses will use a line of credit to:
If you’re looking for a business line of credit without a personal guarantee, it helps to be able to review multiple offers. This would allow you to compare rates and terms to select the best fit.
But you don’t have to apply to numerous lenders all at once. National is the top online business financing marketplace that automatically connects your application to over 75 different lenders to generate personalized offers instantly.
Connect with our experts or fill out the 60-second application to learn about fast funding solutions for your business!
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Amanda is the Marketing Coordinator for National Business Capital. She’s a graduate of Ziklin School of Business at CUNY Baruch College and holds a B.A. in Advertising, Marketing, and Communications. Amanda has extensive experience creating content, directing outreach campaigns, and managing operations. She is passionate about small business and helping entrepreneurs reach new heights.