Unsecured Business Line of Credit

Written by True Tamplin, BSc, CEPF®
Updated on April 6, 2022
An unsecured business line of credit is a line of credit offered to businesses that is not secured by collateral.
An unsecured LOC is the most common form of business lines of credit.
Unsecured lines of credit tend to be more expensive due to the comparatively higher risk.
Unsecured Business Line of Credit for Startups
It can be difficult to get an unsecured business line of credit as a startup.
If you have limited credit history, banks may see you as too risky.
However, there are many alternative lenders, such as online lenders, that have less strict credit requirements and can serve you as well as a bank.
Unsecured Business Line of Credit (No Doc)
A no doc business line of credit is like a regular line of credit, but without requiring as many documents.
No doc lines of credit are often unsecured, meaning they are not backed up by physical assets.
Usually, a no doc LOC will be supported by the personal credit of the business operator.
Small Business Line of Credit – No Personal Guarantee FAQs
What Is a Line of Credit (LOC)?
What Is a Line of Credit and How Does it Work? Revolving vs Non-Revolving
Lines of credit will either remain open, or will close, once the loan has been repaid.
Revolving lines of credit are considered “revolving”because an individual’s credit is replenished when some or all of the outstanding debt has been paid off.
In contrast, a non-revolving line of credit is closed once the account is fully paid off, such as a student loan or mortgage.
Non-revolving credit usually has a lower interest rate.
How does a Line of Credit Work? Secured vs Unsecured
Loans may be unsecured loans, or secured by collateral.
A home equity loan is an example of a collateralized loan, whereby the home is the collateral and will be claimed by the creditor in the event of a default on the loan.
Credit card loans are almost always unsecured, which causes creditors to take on more risk and is why credit card interest rates are generally higher and the borrowing limits are generally lower than secured loans.
Using Credit Lines More Responsibly
While a high line of credit can be an indicator of a business’ ability to pay, it is important to be cautious about its risks, too. Learn how you can be more responsible with your credit line by connecting to a financial advisor in Terre Haute, IN. If you live outside the area, please feel free to browse through our financial advisor page instead.
Understanding a Credit Line FAQs
Disclaimer: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.