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Unsecured Business Line of Credit for Startups

Understanding Different Types of Small Business Loans; Small business owners have different options for small business loans.
Susan Guillory
Susan GuilloryUpdated May 27, 2022
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If you run a startup, you may have trouble finding traditional financing because you haven’t been in business very long or don’t have much business credit. Yet you still need capital to launch your business, renovate space, or hire employees. In that case, an unsecured business line of credit for startups may be one solution worth considering.

Secured vs. Unsecured Business Lines of Credit: The Difference

Before we talk about getting an unsecured business line of credit, let’s first look at the differences between secured and unsecured business lines of credit, as well as what a line of credit is.With both types of small business lines of credit — unsecured or secured — you are approved for a maximum amount of funds. You can take out money from that line of credit, up to that maximum, and then pay it back. This is in contrast to a loan, which gives you a lump sum of money that you then pay back over time.For example, if someone is approved for a $10,000 line of credit, they could take out just $1,000 now and pay that back, and then $8,000 down the road when the money is needed. Whatever is paid back, can be borrowed again.A secured line of credit requires some sort of collateral as security against the financing. That might be a down payment or an asset like real estate or equipment. A secured line of credit may have lower interest rates than unsecured lines of credit because it’s generally considered less risky, given the security provided. Should you not be able to pay back what you’ve borrowed, the lender will be able to take your asset acting as collateral to cover the debt.On the other hand, an unsecured line of credit does not require any pledged collateral. It may be more difficult to be approved for, as lenders may have higher criteria for applicants than with a secured loan, including more stringent requirements around credit scores and revenue history.Adequate funding is critical to running a successful small business. As a startup, you may not yet have assets you can use as collateral for secured lines of credit, so an unsecured business line of credit may be a better fit.

Lenders Offering Unsecured Business Lines of Credit

Now we’ll look at a sampling of brands offering unsecured business lines of credit for startups. Below, find a chart with some key information about each lender.

BlueVine

In addition to offering business checking, BlueVine provides startups with small business unsecured lines of credit. According to their website, its application can take several minutes to complete, and you can see funds deposited into your account within hours of approval.

Pros

  • Lightning-fast application and approval process
  • Also offers business checking

Cons

  • Minimum time in business (six months) may be more than some startups have
  • Repayment period for each draw on the line of credit is short (6 or 12 months)

Requirements for BlueVine Business Lines of Credit

To qualify for financing through BlueVine, applicants will need:
  • 600+ FICO® Score
  • 6+ months in business
  • $10,000 in monthly revenue

Wells Fargo

Wells Fargo offers two startup business lines of credit: the BusinessLine® and the Small Business Advantage®. They vary slightly in terms of amounts and guarantor requirements, but neither require collateral and both are unsecured.

Pros

  • Both lines provide a Mastercard® access card
  • Both offer an exclusive rewards program

Cons

  • BusinessLine annual fees can be $95 or $175 in some cases (waived first year)
  • The BusinessLine has a 3% fee for each advance or transfer made at an ATM

Requirements for Wells Fargo Business Lines of Credit

Startups may be eligible for a Wells Fargo Small Business Advantage line of credit ranging from $5,000 to $50,000. In terms of personal guarantees: for the BusinessLine, personal guarantees from any owner with 25% and a minimum combined aggregate of 51% of the business are required. For Small Business Advantage, personal guarantees from each owner holding 20% or more of the business are required.

Fundbox

Fundbox offers no doc business line of credit funding, which can provide startups with alternative small business loan options. A ‘no doc’ business line of credit uses a simple application process and requires applicants to provide little to no documentation.

Pros

  • Funds available as soon as the next day
  • Relatively low minimum credit score (600+) required to qualify

Cons

  • Only 12 or 24-week repayment options on basic account plan
  • Weekly payments are required

Requirements for Fundbox Business Lines of Credit

To qualify for financing through Fundbox, potential borrowers must have a business checking account and either three or more months of transactions in your account or two or more months of activity in a supported accounting software platform. The credit score requirement is 600-plus. Applicants must also have at least $100,000 in annual revenue, but if you don’t, that’s not necessarily a disqualifier.

SunWise Capital

Another resource for small business unsecured lines of credit is SunWise Capital. Its unsecured lines require a minimum time in business of one year.

Pros

  • Approval in as little as 24 to 48 hours
  • After approval, time to funding may be as little as 24 hours

Cons

  • Short repayment terms: six to 12 months
  • Payments must be made weekly or monthly

Requirements for SunWise Business Lines of Credit

Requirements for lines of credit with SunWise may be more attainable for more startups:
  • Minimum $180,000 annual revenue
  • Minimum credit score of 600+
  • Minimum one year in business

OnDeck

The final lender included in this round up of unsecured startup business line of credit options is OnDeck. Its line of credit offering has no prepayment fee and the option to have that line increased if you meet certain qualifications.Important to know: unlike other options, OnDeck charges a monthly maintenance fee of $20, which may be waived for the first six months if you withdraw $5,000 or more within one week of opening your line.

Pros

  • They offer Instant Funding, depending on the terms. This means fast access to cash, even when banks are closed
  • Possible to get a credit line increase over time, based on qualifications

Cons

  • There is a monthly maintenance fee and high finance charges
  • Payments are automated weekly

Requirements for OnDeck Lines of Credit

To qualify for an OnDeck line of credit, applicants generally need to have been in business for at least one year and have at least $100,000 in annual revenue. You must also have a 600 or higher FICO Score.

Alternatives to Unsecured Business Line of Credit for Startups

Some startups may find it difficult to qualify for an unsecured line of credit. Here are a few other options that may be available to startups.

Business Credit Cards 

Business credit cards can provide new business owners with needed access to cash. They can also be an important tool to help business owners separate their personal finances from their business finances. Credit card issuers will generally review things like your personal credit score and income. Some options may require collateral or a personal guarantee.

SBA Microloans

The U.S. Small Business Administration (SBA) has a microloan program that offers loans up to $50,000 to certain eligible small businesses. These small business microloans can be used to finance things like working capital, inventory, furniture, and machinery or equipment. Other SBA loans may also provide eligible small businesses with funding to meet their needs.

Crowdfunding

There are a variety of crowdfunding platforms online that allow business owners to raise money to support their business. There are a few different types of crowdfunding, but in general, this process allows crowdfunders to raise money for their project without taking on additional debt. For a more detailed look at crowdfunding, take a look at Lantern’s comprehensive crowdfunding guide.

Equipment Financing

Equipment financing may be helpful for businesses that are in need of new or used equipment. With this type of loan, the equipment generally acts as collateral, which can mean that lending requirements may be less strict than for unsecured loans.Depending on the lender, potential borrowers may be able to finance up to 100% of the cost of the equipment. There are also options that may allow you to either lease or loan.

An Unsecured Business Line of Credit Can Give You the Boost You Need

While having access to cash when you need it, rather than in one lump sum, can be tremendously helpful to a startup, keep in mind that some lenders will charge more than others — whether that’s in fees, interest, or both — so it’s important to decide how necessary the financing is to your business right now.Given that the line of credit options discussed here are unsecured, it may be difficult for some startups or applicants with lower credit scores to meet the minimum qualification requirements set by certain lenders. In that case, it may be worth evaluating alternative options that could accommodate minimum credit scores for business loans

The Takeaway

An unsecured business line of credit for startups can help you fund and build your venture. The success of a new business depends largely on its ability to access adequate capital.Lantern by SoFi can help you find fast funding for your business with loans up to $2 million. Just fill out one simple form to see offers from multiple lenders in Lantern’s network.Check your rate today and see if you prequalify.
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.SOLC20063

Frequently Asked Questions

How do I get an unsecured business line of credit?
How do I get a line of credit for my new business?
How do I get a $250,000 unsecured line of credit for my business?
What is an unsecured line of credit for business?
How do I qualify for an unsecured line of credit for small business?
What banks give out unsecured business lines of credit?

About the Author

Susan Guillory

Susan Guillory

Susan Guillory is the president of Egg Marketing, a content marketing firm based in San Diego. She’s written several business books, and has been published on sites including Forbes, AllBusiness, and Cision. She enjoys writing about business and personal credit, financial strategies, loans, and credit cards. Follow her on Twitter @eggmarketing.
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