With a secured line of credit, collateral is required by the lender to secure the loan against default. The collateral is often the receivables, equipment, and/or inventory of the applicant's company. The cost of a secured line of credit is much lower than an unsecured line of credit. A secured line of credit issued by a bank can range from prime rate plus 1%, and a secured line of credit issued by a non bank can range from 7%-12%.
A non secured line of credit, or merchant cash advance, is approved based on the monthly cash flow of the applicants business. The cost of an unsecured line of credit is much higher than a secured line and payments are often weekly or daily, monthly payments are an option for a very solid applicant. Unsecured lines can be considered when there is an urgent cash requirement for the business, and the repayment would not significantly impact the day-to-day cash flow of the business.
5 year term loan - The typical all-in cost for a 5 year unsecured term loan is 15% annually, with monthly payments. A minimum credit score of 680 is needed to qualify for a 5 year term loan offer of up to $300,000.