(800) 949-0401 Apply Now
When you’re considering borrowing money, one of the first decisions you’ll face is whether to take an unsecured or a secured loan. Understanding unsecured vs secured loans will help you decide when each type makes sense for your financial situation. In this post we’ll break down the differences, the pros and cons, when to choose each, and how to make a smart borrowing decision.
If you’re exploring how to qualify for an unsecured loan, you’ve landed in the right place. In this article, you’ll get a clear, comprehensive view of the common requirements for unsecured loans — what lenders look for, how you can prepare, and how to improve your chances of approval.
If you’re considering borrowing money, one of the first questions may be: do unsecured loans have higher interest rates? The short answer is yes — in general, unsecured loans carry higher interest rates than secured loans. But like most things in finance, the full answer requires nuance, context, and an understanding of the factors at play.
If you’re considering borrowing money, it’s important to understand the pros and cons of unsecured loans. An unsecured loan is a loan that isn’t backed by collateral — you don’t pledge your car or home to get it. Because of that, lenders rely on your creditworthiness and other factors when deciding whether to lend.
When you borrow money, one of the first things you might expect is that you’ll need to provide collateral — something of value that the lender can claim if you default. But in many cases, lenders don’t require collateral at all. In this article, we’ll explore why lenders sometimes don’t require collateral, how they manage risk without it, what conditions apply, and what implications this has for borrowers.
If you’re a business owner exploring financing, you’ve likely heard the term unsecured business lending. In this guide, you’ll learn exactly what it means, how it works, when it makes sense, its pros and cons, how to qualify, and how to compare it against secured options.
When you're applying for a business loan, one of the factors that can make or break your approval is credit utilization. Credit utilization refers to how much of your available credit you’re using, and it plays a meaningful role in how lenders view your business’s creditworthiness. In this article, we’ll explore credit utilization, why it matters for business loans, how lenders interpret it, and what you can do to optimize it.
Credit utilization, also called the credit utilization ratio, is the percentage of your available revolving credit that you’re currently using.
Add up the outstanding balances on your revolving credit accounts (credit cards, lines of credit).
Add up the credit limits on those same accounts.
Divide the total balance by the total credit limit, then multiply by 100 to get the percentage.
Example: If your business has two cards with a total limit of $30,000, and you’ve used $10,000, your utilization is 10,000 ÷ 30,000 = 0.333, or 33%.
Many credit-education sources say that keeping utilization below 30% is generally good.
Utilization in the single digits (e.g., under 10%) is seen as even stronger.
Utilization above 30-50% can raise red flags for lenders or credit models.
Credit scoring models view higher utilization as a signal that you’re relying heavily on borrowed credit—this can indicate higher risk. In short: the more credit you use (relative to what’s available), the more lenders may worry about your capacity to repay.
When a lender reviews your application for a business loan, they’re not just looking at your business revenue, cash flow, or collateral—they’re also assessing your overall credit health. Credit utilization is a component of that.
For a business, credit utilization is part of what influences business credit ratings (via bureaus like Dun & Bradstreet, Experian Business, etc.). A high utilization ratio can make your business appear more leveraged and risk-exposed.
Lenders view a business with high utilization as more likely to default or experience cash-flow stress. As a result:
You may face higher interest rates.
Your chances of approval may decrease.
Underwriters may require more stringent conditions or collateral.
If you run a small business (especially a sole proprietorship) and you’ve used personal credit or personal guarantee arrangements, your business’s utilization can affect your personal credit profile—and that in turn affects what business loan you can obtain.
For example:
If you have to personally guarantee a business loan, your personal credit utilization matters as well.
Some business cards report to consumer bureaus, meaning utilization on those cards can affect your personal credit score.
Because credit utilization reflects balances and limits at the time of reporting, lenders may look at recent snapshots of your credit activity. If your utilization spikes just before applying, it could impair your loan approval.
Understanding how lenders interpret utilization can help you position your business stronger when applying for a loan. Here are the key factors they consider:
This is how much of your total revolving credit you’re using. A lower ratio suggests prudent credit use; a high ratio suggests maximum-use and less breathing room.
Even if your overall rate is moderate, a single card or line with very high utilization (e.g., 90%) can trigger concern.
Lenders prefer to see consistent or declining utilization rather than sudden surges. A pattern of increasing usage may indicate pressure or instability.
Credit utilization is part of the broader credit picture: payment history, credit age, credit mix, new credit applications, business revenue, cash flow, etc. A strong payment history may offset slightly higher utilization, but it’s still a risk factor.
If your business is incorporated (LLC, corporation) and your business credit is distinct from your personal credit, the lender will rely more on business credit. If you are a sole proprietor, personal credit factors such as utilization become much more significant.
Let's look at some common business financing types and how utilization plays a role.
For longer-term loans (say 3-10 years) a lender will assess your business’s ability to service debt. High utilization may signal weaker cushion and lead to: higher rate, shorter term, or collateral requirement.
These are revolving credit facilities similar to credit cards but for businesses. If your utilization on your existing revolving accounts is high, you may be denied or given a lower credit limit. Also, usage patterns here directly impact utilization metrics.
While equipment financing often uses the equipment as collateral, underwriters may still look at your overall credit usage. High utilization may reduce your negotiating power for better terms.
For loans like those backed by the U.S. Small Business Administration (SBA), utilization isn’t a standalone metric but falls under the wider credit and debt service review. Lower utilization improves your profile.
Here is a clear, action-oriented list to optimise your credit utilization before you submit your loan application:
Pay down balances on revolving accounts to bring utilization below 30%.
Avoid maxing out cards or lines in the months leading up to application.
Ask for increases in credit limits (if you’re paying responsibly) to lower ratio.
Spread your uses across multiple accounts rather than loading one line.
Keep older accounts open to maintain credit limit and history.
Monitor your business and personal credit reports for reported limits and balances.
Time your application when usage is low – avoid applying right after a big spend
No, but it significantly raises risk in the lender’s eyes. A card at 100% utilization indicates little flexibility to absorb shocks, which can affect terms or approval.
Yes — increasing the denominator (available credit) while maintaining or reducing your balance lowers the ratio. But be cautious: a higher limit may tempt higher spending.
Interestingly, yes. Using zero credit might mean you have no credit usage history to show responsible repayments. Some credit-reporting discussions say a small amount of usage (<10%) is better than zero.
It depends. Some lenders pull fresh credit reports at or just before loan decision. Others may rely on data already in your profile. Because utilization can fluctuate monthly, you’ll want your balance-to-limit ratio to be strong at the time of review.
Sometimes. If the business account reports to consumer bureaus or you personally guarantee the debt, utilization in the business account may be included in your personal credit profile. For sole proprietors this is especially relevant.
Here are some best practices to weave into your business credit strategy:
Maintain separate business and personal credit accounts where possible. Clear separation helps lenders isolate business risk from personal risk.
Track both business credit and personal credit reports if you have personal guarantees.
Build credit-history length: older accounts and lines provide more trust for lenders.
Use revolving credit for short-term needs but pair it with term debt for long-term investments — this improves your credit mix. Crestmont Capital
Communicate with lenders: if you have seasonal fluctuations, explain how you use credit strategically (e.g., draw line early, pay down after peak).
Aim to apply for major loans at times when your utilization ratio is strongest — for example, after paying down a large balance or before the busiest spending period.
Monitor your ratio monthly. Consider setting internal thresholds (e.g., avoid using more than 25% of available credit).
Imagine a small business that has the following:
Credit card limits totaling $50,000.
Current card balances of $30,000. That’s a utilization of 60% (30,000 ÷ 50,000).
Because the utilization is high, a lender may flag the business as using a lot of its credit capacity, raising concerns about cash flow and ability to repay additional debt. The lender might either offer a higher interest rate, require collateral, or even deny the loan.
Now imagine the business pays down the balances to $10,000. Utilization drops to 20% (10,000 ÷ 50,000). This looks much stronger and may result in better loan terms (lower rate, higher approval odds).
This example shows why managing utilization ahead of a loan application matters.
In summary:
Credit utilization is a key metric in assessing business loan readiness. Lenders use it as a gauge of how much borrowed capacity you’re already using and how much headroom you have. Keeping utilization low (ideally under ~30%) helps position your business for stronger terms, better approval odds, and lower interest rates. It matters for both your business credit and, sometimes, your personal credit depending on guarantees or reporting. By proactively managing your utilization—paying down balances, spreading usage, increasing limits, and timing your application—you strengthen your borrowing profile and unlock better financing opportunities.
If you’re preparing to apply for a business loan soon, start with these three steps:
Pull your current credit report (both business and personal if applicable).
Calculate your current utilization ratio across all revolving credit sources.
Create a plan to bring that ratio down (or keep it low) in the 30-90 days leading up to your loan application.
Ready to take the next step? If you’d like help evaluating your credit profile or preparing your business loan application, let’s schedule a free consultation to review your numbers, sharpen your strategy, and position you for success.
When you’re aiming to qualify for a loan—whether it’s a personal loan, auto loan, or even a mortgage—the right credit history can make or break your application. One tool that often gets overlooked is the secured credit card. In this post we’ll cover how a secured credit card works, why it matters to lenders, and how you can use it strategically to improve your loan approval odds.
Getting denied for a business loan can be disheartening, but it’s not the end of your financial journey. Rebuilding credit after a business loan denial is entirely possible with the right strategy, patience, and consistency. This guide walks you through understanding why your application was denied, how to repair and strengthen your credit, and what steps to take before reapplying.
When you default on a loan, the impact can ripple far beyond that missed payment. The phrase loan default means more than falling behind — it signals to lenders and credit bureaus that you’ve broken the payment agreement. From your credit score plummeting to long-term hurdles securing new credit, the consequences are extensive. In this guide, we’ll explore how loan defaults damage credit, why it matters, and what you can do to recover.
Your Privacy Choices