Unsecured Line of Credit
Financing credit accommodations on an unsecured basis carries a higher degree of risk. The lack of collateral raises reliance on the borrower's cash flow from income and liquidity as well as on the guarantor.
It is typical for unsecured revolving lines of credit to have certain requirements such as an out of debt provision requiring the facility to be paid to zero for 30 consecutive days during the borrowers fiscal year and/or a requirement for the borrowing entity's total unsecured bank debt and commitments, including proposed facility, to not exceed 50% of its tangible net worth.
Obtaining an unsecured line of credit for start-up business enterprises can be an exceptionally challenging undertaking. The unsecured line of credit definition includes the caveat that these financial arrangements are generally only available to businesses with an established credit history and a number of years in business, making it far less likely that a start-up company could qualify for these loans. In general, unsecured lines of credit offer a greater degree of flexibility in managing financial obligations. Lines of credit, by their very nature, are revolving accounts with a preset spending limit. Borrowers can spend up to that limit but must make regular payments, thus reducing the amount owed and freeing up a portion of the credit limit for reuse. This process can be repeated indefinitely as long as the borrower continues to pay the amount due on the loan on time. Unsecured lines of credit require no collateral. Approval for these lending arrangements is based on the company's ability to pay and its past credit history. Because newer businesses have not had time to establish a solid credit history, it is exceptionally difficult to find an unsecured line of credit for start-up business needs.
CNF Exchange provides start-up businesses with some track record and established companies with a valuable online venue that allows them to submit their funding requests and financial information directly to lenders through the secure Investor Exchange platform. This innovative system allows borrowers to connect with lenders directly and to find the most advantageous financial arrangements for their financial situation. Lenders can submit proposals in response to funding requests, allowing borrowers to select from among a number of choices and to make the most financially sound decision to resolve their funding needs. CNF Exchange makes it simple to acquire the needed funding for a wide range of business needs.