A line of credit in simpler words can be defined as the prescheduled limit of certain credit which is based on the amount requested by the borrower. The objective of a credit line is to finance similar to loans but the credit line differs in the working method. Here, the borrower can borrow a certain amount, and into multiple timesuntil it reaches the maximum limit (maximum amount asked by a borrower to borrow).The best advantage of the line of credit is that it can function in segments method that is part by part whether to borrow amount, interest to be applied on the amount or the repayment of the amount all can be scheduled in parts not necessarily to be completely whole amount. There are different types of lines of credit functioning to provide finance for various purposes. One such is –an unsecured business credit line.
There are two categories of credit line – secured credit line and unsecured credit line.
Secured credit line loansoffer the credit line loan to the borrower company on the condition to pledge the assets as security to get the required line of credit loan which is used by the financial institutions in the situations of non-payment of the borrowed amount.
An unsecured credit line offers the line of credit loan to the borrower company without any collateral but considering the eligibility criteria and the policy guidelines of the particular financial institution which is scheduled for the loan approvals. This is how different is an unsecured line of credit is froma secured line of credit. Under this category of the credit line, there is a business credit line type. The complete term can be“Unsecured business credit line”.
Unsecured business credit line loan refers to providing the finance to the borrower company without any collateral requirement. The financial institution offeringunsecured business credit line loan consider the loan application for approval over the eligibility criteria and their policy strategies of working. They calculate the market study, the profit gain, the business expansion plans, the working strategies, etc. of the borrower company before the loan extension to the company.
There are various beneficial features of an unsecured business credit line for the business aspirants to prefer for financing the business expenses of their company. Firstly, these credit lines offer a way of borrowing the amount in parts, the rate of interest is also applicable over these parts which are being borrowed out from the whole credit sum. Secondly, they are unsecured credit line category so they do not require collateral for the loan approval. Even they are flexible and easy working method. They also provide relaxation in loan repayment procedure that is up to the borrower either to pay at once the whole credit sum or continue by parts. Borrowers hold the right on the borrowed part of the amount where it has to be applied.
Hence, this is the working mechanism of the unsecured business credit line along with the benefits which it offers to the borrowers. Therefore, the finance method is an essential part of the business circle. It completely lies over the borrower company which kind of finance method they would prefer to fulfill the requirements uprising in the business.