Getting a loan through a business line of credit means that you get a lot of money upfront for your business but you pay that money back either from money your business makes over time, or from assets your business has that are worth the same amount as the loan, plus interest. Those are the two ways lenders can be paid back. Therefore, you can take out a secured business line of credit (lenders using assets as collateral), or an unsecured business line of credit (lenders having your legal word that you will pay back the loan). But, what if you still have trouble getting the loan? Perhaps lenders do not like your business plan for an unsecured loan, or your business does not have enough valuable assets for lenders to hold as collateral for a secured loan. What would your other options be?
Assets can be more than tangible items from your business. Assets held as collateral can also be stocks, bonds, and even the money value of insurances! If worse comes to worse, you as the owner of the business, could always put your house up for an asset as well to be held as collateral. Just be sure you would be willing to lose your house if your business fails and you are unable to pay back the loan. If, however, you feel confident you would be able to pay off the loan, having an actual asset the lenders can hold as collateral will more than likely give you a lower interest rate which will save you a ton of money. Lenders will feel more comfortable knowing that they can always sell your asset if things go wrong than just taking your legal word that you will pay back the loan. Lenders will therefore feel that they will not need to protect themselves as much from not getting paid back the loan in full by increasing the interest rate.
