Secured Business Line of Credit: Borrow Against What You Own

Securing an asset generally reduces the cost of borrowing, which is why business owners turn to a secured business line of credit. It's a revolving credit line you back with collateral: You draw money as needed up to your credit limit, repay it, and draw again, paying interest only on what you actually use. Your credit limit depends on the value of the collateral you pledge and your creditworthiness. Because you're offering an asset, lenders take on less risk and typically offer lower rates and higher limits than they would on an unsecured line. Think of it like a business credit card, with one important catch. If you fail to repay, the lender can claim your collateral.

One common version is a home equity line of credit (HELOC), a revolving line backed by the equity in your house. It works like any other secured line, just with your home as the collateral. If you've ever thought about tapping your home's value for your business, you've already pictured how a secured line works.

I'm Michael Baynes, co-founder of Clarify Capital. Over more than 15 years, I've helped small and mid-size business owners weigh secured lines against every other option out there. Below, I'll cover how these lines function, what you can use as collateral, who typically qualifies, and how to tell whether a secured line fits your business.

Benefits of a Secured Business Line of Credit

Here's how business owners benefit from secured lines of credit.

Lower interest rates

Since your collateral will support the loan, your lender may offer you a lower interest rate compared to an unsecured loan.

Higher credit limits

Because you've pledged an asset, you may be able to borrow more than you could on your signature alone, so you have a higher total amount of available credit.

Flexibility

Only take out as much money as you need at the moment.

Reusable credit

As you pay off each draw (which you can do at any point), your available credit builds back up, making this line of credit available for your future needs.

Building business credit

Using the line and repaying on time can help you improve your credit score.

What Can Secure a Business Line of Credit?

Below are common types of collateral accepted by lenders.

Home equity (HELOC)

This is probably the best-known form of collateral for a business line of credit. You pledge the equity in your home as collateral and generally get the lowest rates.

Commercial real estate

If your business owns commercial property, you can use it as collateral for the line.

Accounts receivable

Your unpaid customer invoices can serve as collateral for the line.

Inventory

Merchandise your business owns can serve as collateral for the line.

Equipment

Machinery, vehicles, and other gear your business owns can serve as collateral for the line.

Cash or certificate of deposit (CD)

Deposits provide security for the line. Businesses often use them to establish or rebuild their credit history.

Secured Line of Credit vs. Other Financing Options

A secured line isn't your only option. Here's how it compares to an unsecured business line of credit and a term loan.

Feature	Secured business line of credit	Unsecured business line of credit	Term loan
Collateral	Required, such as home equity or business assets	Not required	Sometimes required
Typical rates	Lower, because collateral backs the line	Higher, because nothing backs the line	Varies by lender and term
Credit limits	Often higher	Often lower	Set loan amount
How you get the money	Draw as needed, up to your limit	Draw as needed, up to your limit	One lump sum up front
Repayment	Pay interest on what you use	Pay interest on what you use	Fixed payments over a set term
Main risk	You could lose the pledged asset	No asset on the line	You could lose collateral if any is pledged

The right pick comes down to what you own, how fast you need the money, and how much risk you're willing to take on.

Minimum Qualifications

$10,000 in monthly revenue

Your business must earn at least $10K per month in a business bank account.

500+ credit score

You can get approved with any credit score. But the better your credit rating, the better interest rates lenders offer. Your FICO score should be above 500.

Minimum six months in business

Your company should be operational for a minimum of six months. This shows business lenders that your company is sustainable and won't go out of business.

Have a business bank account

Your Clarify advisor will need three or four months of your most recent bank statements to verify income. This is just to see you're actually making $10K+ month in revenue.

Start Application

HELOC for Business

A HELOC allows you to borrow against the equity in your home, or the market value of your property minus any outstanding mortgage balance. During the draw period (which could last about 10 years), many HELOCs allow you to make payments based on interest alone on whatever amount you have actually drawn down.

Since your home is the collateral supporting the HELOC, typical rate levels are lower than those found in unsecured forms of business credit. Most HELOCs include a variable rate structure, meaning that your monthly payment could move either upward or downward depending on changes to the overall rate environment.

Who Is a HELOC Suitable For?

HELOCs typically make the most sense for business owners who have significant home equity and want to use a secured line at the lowest possible interest rate available. If you prefer not to use your house as collateral, using a line supported by business assets keeps all your personal property off the table.

Clarify offers home equity lines up to $750,000, subject to qualifying real estate, with financing as fast as one week. So you can see how a home equity line could work for your business.

How To Apply

Getting a business line of credit through Clarify is simple:

Complete the online application

This should take less than 2 minutes.

Discuss your loan needs with a lending advisor

You'll work with a real, U.S.-based person, never a call center or a chatbot.

Provide all necessary information

Your lending advisor will need to review three to four months of your recent business bank statements to confirm your average monthly income.

Review your options

Once reviewed, you'll know what you're eligible for and you can select which line of credit best meets your requirements.

Where To Get a Secured Business Line of Credit

There are a few places to get a secured line of credit:

Banks and credit unions. Traditional lenders typically offer the most competitive interest rates, but they usually require more time to process and are stricter when approving applicants.
Online lenders. These lenders usually provide quicker turnaround times and accept a broader base of applicants, although their rates may be slightly higher.
Lending marketplaces. A marketplace like Clarify Capital gives you access to multiple lenders in one place, so you can compare offers before making a decision.

Clarify works with 75+ vetted, reputable lenders to help you find the option that makes the most sense for your business. If you'd prefer to avoid collateral altogether, Clarify offers a revenue-based business line of credit that's approved on your company's revenue instead of an asset.

Take the Next Step Toward Business Growth

A secured business line of credit can give you the flexibility to cover low-income periods, capitalize on large orders, or manage daily operational expenses. Whether you use your home equity to secure a HELOC or use business assets to secure a line of credit, Clarify can help with its network of 75+ vetted lenders. The application takes just two minutes. Apply today to get started.

Frequently Asked Questions About Secured Business Lines of Credit

Here are some of the most common questions that I hear from borrowers when they're considering a business line of credit.

Are Lines of Credit for Businesses Secured or Unsecured?

Both. A secured line of credit has collateral behind it, such as home equity or business property (equipment). This type of line of credit typically gives you lower interest rates and larger credit lines. An unsecured line of credit doesn't have collateral, so it usually costs more than a secured one. The choice of secured vs. unsecured ultimately lies with you, depending on what assets you have available to use as collateral and what you're after.

Will an LLC Qualify for a Business Line of Credit?

Yes. A limited liability company (LLC) may be able to qualify for a line of credit (either secured or unsecured) with a lender. When applying for a business line of credit, a lender will evaluate your business's income, length of time in business, and your credit history. To secure a line of credit, you'll also need to provide collateral to back the loan. Collateral can include home equity, accounts receivable, or equipment.

What Is the Monthly Payment on a $50,000 Line of Credit?

This depends on your interest rate, how much money you withdraw from your line of credit, and your repayment terms. For example, a $50,000 secured line of credit using home equity as collateral at 6% interest would likely run about $250 per month during the draw period. At 8% interest, you could expect payments closer to $333 per month. And if you were to pay off the entire $50,000 line over a 24-month period at 6% interest, you could expect to pay about $2,200 per month.

How Do I Get a $100,000 Business Line of Credit?

With a loan this size, we're going to require stronger financials. Generally, we'll look for at least $10,000 per month in revenue and a minimum personal credit score of 620 or better. We also require that our clients have been operating their business for at least 12 months before requesting financing. Larger loan amounts usually call for stronger financials. That said, using a secured line of credit (i.e., securing the line with an asset) can help you reach larger amounts than you could otherwise. Your lending advisor can review your financial picture and let you know exactly where you stand and what you'd qualify for.

What Will Be the Monthly Payment on a $100,000 Business Loan?

This will depend on the interest rate and term length of your loan. A $100,000 loan at 6% interest paid out over a 24-month period comes to about $4,432 per month. Paying the same loan over a 60-month period at 6% interest reduces the monthly payment to about $1,933 per month. As you extend the length of your loan, your monthly payment decreases, but you increase the total interest you'll pay over the life of the loan. Your lending advisor can create customized reports detailing both your possible monthly payment and the estimated total interest paid over time.

Is My Personal Financial Data Safe When I Apply With Clarify?

Yes. Clarify follows SOC 2 security principles. That helps protect your confidential information throughout the application process. Checking your options will not affect your credit score.

Michael Baynes

Co-founder, Clarify

Michael has over 15 years of experience in the business finance industry working directly with entrepreneurs. He co-founded Clarify Capital with the mission to cut through the noise in the finance industry by providing fast funding and clear answers. He holds dual degrees in Accounting and Finance from the Kelley School of Business at Indiana University. More about the Clarify team →