Unsecured Business Line of Credit: What It Is & How To Get It

An unsecured business line of credit is a financing product that allows you to draw and repay the funds over and over again without having to reapply or pledge collateral to secure the loan. Not all businesses have collateral that they can use to secure their financing, making an unsecured business line of credit ideal.

If an unsecured business line of credit (LOC) sounds like the financing tool that you need, OnDeck offers an unsecured business LOC of up to $100,000. Interest rates start at 13.99%, with a six-month repayment term. If your business generates $100,000+ in annual revenues, and has been operational for at least one year, you can get pre-qualified online in minutes.

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How an Unsecured Business Line of Credit Works

An unsecured business line of credit works in the same manner as a secured line of credit. The lender approves a credit line of a certain amount, and you are able to borrow and repay funds as needed until you reach the credit limit. The difference: Unsecured credit lines do not have collateral backing them.

Generally, lenders require that you pledge collateral as a security against the value of the loan, or line of credit that you receive. With an unsecured business LOC, there is no specific asset leveraged against the borrowed funds. The lender bases their approval on your personal and business creditworthiness, as well as your business operations.

Because the line of credit is not backed by a specific asset, there is more risk to the lender with this type of financing; as such, you will find that interest rates on unsecured credit lines are higher than the rates for secured credit lines.

Who an Unsecured Business Line of Credit Is Right For

An unsecured business line of credit works well for businesses that need temporary or recurring working capital influxes, and do not have collateral to pledge as security for a loan. Due to the revolving nature of a business line of credit, the ongoing availability of funds is well suited for businesses that have cyclical revenues.

The two primary categories of businesses that may be interested in an unsecured business LOC are:

• Businesses with short-term and periodic working capital needs
• Businesses that do not have collateral available

Perhaps you own a lakeside restaurant. During the summer, your business is operating at full capacity, as everyone is enjoying the lake during the summer weather. However, as the weather changes and fall moves into winter, your business slows down. A line of credit would allow you to draw funds during these slow times to supplement your working capital.

Unsecured Business Line of Credit Costs

The standard rates that you can expect with an unsecured business line of credit through an online lender include average APRs of 30% to 50%, which are inclusive of lender origination fees, prepayment penalties, and other lender fees. While these are average APRs, you may be able to get better rates through some lenders, with the lowest rates being available through traditional banks.

The typical costs associated with an unsecured business line of credit are:

• Interest Rate (average 14% to 30%) – The amount of interest that the unsecured business LOC provider charges you on the amount drawn.
• Expected APR (average 30% to 50%) – The calculated annual percentage rate for funds borrowed on your line of credit, including interest charges and any fees charged by the provider.
• Origination Fee (average 0% to 5%) – The fee the lender charges for setting up the unsecured business LOC.
• Prepayment Penalty – Any charges, or fees, associated with paying your loan balance off before the end of the repayment term. If your loan has a prepayment penalty, you may find that it’s less expensive for you to continue to pay on schedule than to pay the loan off early.
• Additional Fees – Any additional fees that the provider may charge for an unsecured business LOC. For example, some lenders may charge you an application fee, or a loan origination fee.

Traditional banks and credit unions tend to offer lower rates and fees than online lenders. However, online lenders generally have more lenient qualification requirements (e.g., lower credit score requirements). If you qualify for an unsecured business LOC through a traditional lender, it will likely have a lower overall cost of capital for you as the business owner.

Unsecured Business Line of Credit Repayment Terms

The loan amounts for an unsecured business line of credit generally range between $1,000 and $250,000, depending on the creditworthiness of the business and its owners. The standard repayment terms for unsecured business lines of credit with an online lender are between six months and 12 months, and payments are collected either on a weekly or monthly basis.

Unsecured business lines of credit through online lenders work a little differently than a line of credit that you might receive from a traditional bank. An unsecured business loan through an online lender operates similarly to a short-term loan. Each draw that you make results in a mini-loan, with a six- to 12-month fixed payment. As payments are made to the mini-loan, the repaid funds get added back into your line of credit to be borrowed again.

The typical repayment terms that you can expect with an unsecured business line of credit from an online lender are:

• Loan Amount: $1,000 to $250,000
• Repayment Term: Typically six to 12 months
• Repayment Schedule: Either weekly or monthly payments

An unsecured business LOC from a traditional lender or an SBA line of credit is not set up with the same “mini-loan” format that you would get from an online lender. Businesses that receive a line of credit from a traditional lender won’t have a fixed repayment period. Instead, you’ll pay monthly interest-only payments and may need to, at some time in the year, pay the principal balance down to $0 on your own accord.

Unsecured Business Line of Credit Qualifications & Other Requirements

To qualify for an unsecured business LOC with an online lender, you will need a credit score of 600+, six months of business operations, and $50,000+ in annual revenues. Because there is no collateral used, the lender will often require a personal guarantee and a blanket UCC filed on your business assets.

The standard qualification requirements that you can expect when applying for an unsecured business line of credit from an online lender are:

• Credit Score: 600+
• Time in Business: Six+ months
• Annual Revenue: $50,000+
• Personal Guarantee: May be required
• Blanket UCC Filing: May be required

Traditional lenders will have more stringent qualification guidelines than online lenders. To qualify for an unsecured business LOC with a traditional lender, you will need to have a prime credit score (680+), be an established business with at least two years of business operations, and annual revenues exceeding $200,000.

Despite the fact that neither online nor traditional lenders will require you to collateralize a specific asset to secure the loan, they will likely require you to provide a personal guarantee in conjunction with lending you funds. In the event that you default on the loan payments, the lender will require that you use your personal assets to repay the borrowed funds.

Additionally, a lender may also require the filing of a blanket UCC lien against your business assets (e.g., equipment, accounts receivable). The UCC lien is filed with the secretary of state in the state that your business is incorporated in. It provides notice to other potential lenders that there is an outstanding lien on your business. Once your loan is repaid, the UCC will be discharged.

How to Get an Unsecured Business Line of Credit

You can get pre-qualified online for an unsecured business line of credit with most online lenders within minutes. The business loan provider will typically need to connect to your business checking account in order to verify your business income. You can often be approved within hours, and in most cases you can receive funds within one to three business days.

Many traditional lenders allow you to apply for an unsecured business LOC online, though some may still require that you complete a paper application and deliver it to the bank. The lender will evaluate your financial status and repayment ability by verifying the information provided in your application. The approval and funding process may take a week or more.

Where to Get an Unsecured Business Line of Credit

There are numerous options when looking for an unsecured business line of credit. Many traditional banks offer line of credit options, though their qualification requirements are often far more restrictive than their online lending counterparts. We have provided the details for three of the most popular online lenders that provide unsecured business lines of credit.

Top Unsecured Business Line of Credit Providers

Provider	Best For
BlueVine	Businesses needing up to $250,000, with only 6+ months of business operations
OnDeck	Prime borrowers (credit score of 700+) needing up to $100,000
Kabbage	Businesses with $50,000+ in annual revenues needing up to $250,000

Some online lenders for unsecured business lines of credit are:

1. BlueVine

BlueVine offers unsecured lines of credit from $1,000 to $250,000, at rates between 0.2% and 1.2% per week. Repayment terms range from six to 12 months, and payments are made either weekly or monthly. To qualify, you need a credit score of 600+, six months of business operations, and annual revenues of $100,000+.

BlueVine Unsecured Business Line of Credit Rates & Fees

BlueVine offers an unsecured business LOC with interest rates as low as 0.2% to 1.2% per week (which calculates out to an APR ranging between 30% and 50%). There are no origination fees and no prepayment penalties; however, if you choose to pay by wire transfer, there is a $15 fee per payment.

The typical rates and fees that you can expect with an unsecured business line of credit with BlueVine are:

• Starting Interest Rates: As low as 0.2% to 1.2% simple interest per week
• Expected APR: ~30% to 50%
• Origination or Maintenance Fees: None
• Prepayment Penalty or Termination Fees: None
• Additional Fees: $15 bank wire fee (ACH is free)

BlueVine Unsecured Business Line of Credit Terms

BlueVine offers an unsecured business line of credit in amounts ranging from $1,000 to $250,000. Repayment terms can either be six months or 12 months, and payments are made either weekly or monthly. BlueVine does require a personal guarantee and a blanket UCC filing as loan security for their unsecured business LOC.

The standard terms for an unsecured business line of credit with BlueVine are:

• Loan Amount: $1,000 to $250,000
• Repayment Term: Six or 12 months
• Repayment Schedule: Weekly or monthly
• Collateral: Blanket UCC filing on business assets
• Personal Guarantee: Required

BlueVine Unsecured Business Line of Credit Qualifications

If your business has been operational for at least six months, is producing annual revenues of greater than $100,000, and you have a credit score of 600 or greater, you may qualify for an unsecured business LOC through BlueVine. Longer-term, higher dollar value lines of credit have slightly different qualification parameters.

The typical qualifications for an unsecured business line of credit with BlueVine are:

• Credit Score (check your score for free):
  • 600+ for a six-month term with weekly payments
  • 650+ for a 12-month term with monthly payments
• Time in Business: Six+ months
• Annual Revenue:
  • $100,000+ for a six-month term with weekly payments
  • $500,000+ for a 12-month term with monthly payments

BlueVine offers unsecured business lines of credit up to $250,000 with repayment terms of either six or 12 months. If your business has been operational for at least six months and you have a credit score of 600 or greater, you can apply online and, once approved, receive funding within 24 hours.

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2. OnDeck

OnDeck offers an unsecured business line of credit of up to $100,000 to borrowers with credit scores of 600 or greater, one year of business operations, and $100,000+ in annual revenues. Interest rates start as low as 13.99% for prime borrowers. The repayment term is six months, and payments are due weekly.

OnDeck Unsecured Business Line of Credit Rates & Fees

OnDeck offers an unsecured business LOC with interest rates starting as low as 13.99% for prime borrowers (credit score of 700+). The APR on OnDeck’s unsecured business lines of credit ranges from roughly 30% to 50%. OnDeck does charge a small $20 origination fee, but this fee can be waived under certain circumstances.

The typical rates and fees that you can expect for an unsecured business line of credit with OnDeck are:

• Starting Interest Rates: As low as 13.99% APR (prime borrowers with 700+ credit scores can potentially get the lowest rates)
• Expected APR: ~30% to 50%
• Origination Fee: $20 per month maintenance fee, waived for six months if you draw $5,000 within five days of account opening
• Prepayment Penalty or Termination Fee: No prepayment penalty, but you owe the full interest charge if you repay early, with a potential prepayment discount applied
• Additional Fees: None

OnDeck Unsecured Business Line of Credit Terms

With OnDeck, you can get an unsecured business LOC of up to $100,000, with a repayment term of six months with weekly payments. While no collateral is required for their unsecured line of credit, you will need to sign a personal guarantee and a blanket UCC will be filed on your business.

The typical terms that you can expect with an unsecured business line of credit from OnDeck are:

• Loan Amount: Up to $100,000
• Repayment Term: Six months
• Repayment Schedule: Weekly
• Collateral: Blanket UCC filing on business assets
• Personal Guarantee: Required

OnDeck Unsecured Business Line of Credit Qualifications

Qualifying for an unsecured business LOC with OnDeck is simple. OnDeck requires that you have a credit score of 600+, that your business has been operational for at least one full year, and that it is generating $100,000+ in annual revenues. The better qualified you are, the better the rates that you will receive.

The standard qualification requirements for an unsecured business line of credit with OnDeck are:

• Credit Score: 600+ (check your score for free)
• Time in Business: One+ years
• Annual Revenue: $100,000+

OnDeck provides unsecured business lines of credit in amounts up to $100,000, at interest rates starting as low as 13.99%. If you have been in business for one year and have a credit score exceeding 600, you can apply online and find out if you are pre-qualified in minutes.

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3. Kabbage

Kabbage offers an unsecured business line of credit from $2,000 to $250,000, and charges a monthly fee rate of 1.5% to 10%. Repayment terms are either six or 12 months, with monthly payments. To qualify, you will need a credit score of 600+, one year of business operations, and $50,000+ in annual revenues.

Kabbage Unsecured Business Line of Credit Rates & Fees

Kabbage charges a monthly fee rate of 1.5% to 10% of the outstanding principal amount, which equates to an APR of roughly 30% to 50%. There are no additional fees and no prepayment penalty with Kabbage; in fact, you can actually save money by paying the borrowed amount off early and avoiding the future monthly fees.

The rates and fees that you can expect with an unsecured business line of credit from Kabbage are:

• Starting Interest Rates: 1.5% to 10% monthly fee rate
• Expected APR: ~30% to 50%
• Origination or Maintenance Fees: None
• Prepayment Penalty or Termination Fees: None
• Additional Fees: None

Kabbage Unsecured Business Line of Credit Terms

Kabbage offers an unsecured business LOC in amounts ranging from $2,000 to $250,000, with repayment terms of either six months or 12 months. Payments are made monthly. Kabbage does not require a personal guarantee, but does require that a blanket UCC be filed with the secretary of state against your business assets.

The typical terms of an unsecured business line of credit with Kabbage are:

• Loan Amount: $2,000 to $250,000
• Repayment Term: six months or 12 months
• Repayment Schedule: Monthly
• Collateral: Blanket UCC filing on business assets
• Personal Guarantee: None

Kabbage Unsecured Business Line of Credit Qualifications

To qualify for an unsecured line of credit with Kabbage, you will need to have a credit score of 600+, your business needs to be operational for one+ years, and needs to be generating at least $50,000 in annual revenues. Kabbage has the lowest annual revenue requirements of the lenders listed in this article.

The standard qualification requirements for an unsecured business line of credit through Kabbage are:

• Credit Score: 600+ (check your score for free)
• Time in Business: One+ years
• Annual Revenue: $50,000+

If you have a credit score of 600+, a full year of business operations, and at least $50,000 in annual revenues, you can qualify for an unsecured business LOC with Kabbage. You can apply online for a line of credit up to $250,000 in a matter of minutes, and receive funding within two days.

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Pros & Cons of an Unsecured Business Line of Credit

An unsecured business line of credit provides you with quick access to working capital, with the flexibility to borrow and repay as your cash flow allows. Additionally, it can allow you to build your business’ credit history. However, the requirement of a personal guarantee can be a dissuading factor, especially if you are already short on working capital and worry that drawing heavily on the line of credit might be burdensome to repay within the term.

Pros of an Unsecured Business Line of Credit

The pros of an unsecured business line of credit are:

• Quick Access to Working Capital – For businesses with short-term working capital needs, an unsecured business LOC can provide them the flexibility to quickly borrow funds as they are needed to cover cash flow gaps.
• Flexible Borrowing and Repayment – With an unsecured business LOC, you can borrow only what you need of the credit line as you need it, and repay it either in weekly or monthly installments or pay it in full after each draw as your business cash flow allows.
• Build Your Business’ Credit Profile – Because the line of credit is issued to your business, an unsecured business LOC provides you an opportunity to establish a credit history for your business.

Cons of an Unsecured Business Line of Credit

The cons of an unsecured business line of credit are:

• Potentially High Cost of Capital – With APRs ranging from 30% to 50%, an unsecured business LOC from an online lender is not the most economical form of financing. However, you only pay interest on the amount that you borrow, unlike a traditional loan where the entire amount is advanced to you upfront.
• Personal Assets Are at Risk – With no collateral assigned to secure the loan, you face personal loss in the event that your business fails to meet its debt obligation. By signing a personal guarantee, your personal assets can be claimed by the lender as repayment of the business line of credit.
• What Is Borrowed Must Be Repaid – If your business is struggling to meet working capital needs, an unsecured business LOC may temporarily ease that financial burden. However, the short repayment period does not allow for much time to repay what you have borrowed.

Alternatives to an Unsecured Business Line of Credit

If you are uncertain that an unsecured line of credit meets your financing needs, you may want to consider an alternative. A short-term loan can provide you with longer repayment terms. Accounts receivable financing provides you with an advance on your current receivables, and a business credit card offers you a revolving credit line.

Some alternatives to an unsecured business line of credit are:

Short-Term Small Business Loan

If your business needs an influx of working capital, and you need slightly longer repayment terms than those offered with an unsecured business line of credit, you may want to consider a short-term loan for your financing needs. If you’re wondering how to get a small business loan, we can show you the steps.

Accounts Receivable Financing

If you need working capital and have outstanding customer invoices that are due within 90 days, accounts receivable financing may be ideal for your business. Funding can generally be completed within one to three business days of application. Finding the best invoice financing company for your business can make the process go smoothly and quickly!

Small Business Credit Card

A small business credit card is an alternative line of credit option. If you are interested in earning credit card rewards, or are looking for a way to manage employee expenses, a credit card could be the solution. Be sure to do your research and find the best small business credit card for your needs.

Unsecured Business Line of Credit Frequently Asked Questions (FAQs)

A lot of information has been covered in this article about unsecured business lines of credit, what they are, how they work, finding the right lender, and applying for a line of credit. If you have any questions about any of the information presented here, you can post them in the Fit Small Business forum.

Some of the most frequently asked questions regarding unsecured business lines of credit are:

What Is an Unsecured Business Line of Credit?

An unsecured business line of credit is a line of credit that has no collateral securing it. It operates in the same way as a secured line of credit, in that you are approved for a certain amount of funding that you can then draw on as needed. You only pay interest on the amount borrowed.

How Do I Get a Business Line of Credit?

With most business line of credit lenders, you can complete the application online via their website. You’ll submit basic personal and business information to be pre-qualified, and you’ll be asked for additional information to verify your revenues. Generally, approval of your application occurs the same day and funding takes one to three days.

What Is the Difference Between a Secured & Unsecured Line of Credit?

The difference between a secured and an unsecured line of credit is simple: collateral. With a secured line of credit, your lender will take a lien against a specific asset (e.g., your house). An unsecured line of credit has no asset associated.

Interest rates are typically higher on unsecured lines of credit because there is greater risk to the lender. With a secured line of credit, the costs are often lower because it’s backed by collateral. This means the lender has rights to the pledged assets in the event you don’t repay.

What Is an Unsecured Line of Credit?

An unsecured line of credit is a revolving credit facility that has no collateral backing it. With a line of credit, you can use the funds over and over as the principal is repaid without needing to reapply. Plus, you only pay interest on the amount that’s outstanding.

Bottom Line

Not all businesses have collateral that they can, or want to, use to secure their financing. However, most loans require that you pledge collateral as security. In this case, an unsecured line of credit may be ideal. Unsecured business lines of credit offer you borrowing flexibility, allowing you to draw only the funds you need and the opportunity to borrow again as they are repaid.

The best rates and terms for an unsecured business line of credit will be offered by traditional lenders, like banks and credit unions. However, if you are unable to meet the qualification requirements of a traditional lender, or don’t qualify for the amount that you need, you may want to consider an online lender. Unsecured business lines of credit through an online lender may have a higher overall cost of capital, but the qualification requirements are typically more lenient than a traditional lender.

OnDeck offers an unsecured business line of credit of up to $100,000 with interest rates starting at 13.99% for prime borrowers (borrowers with a credit score of 700+), and a six-month repayment term. If your business generates $100,000+ in annual revenues and has been operational for at least one year, you can apply online and find out how much you may qualify for within minutes.

Visit OnDeck