by Joseph Kenny | 10/2/08

If you are just launching a new business, you may be encountering a range of financial difficulties. However, financial experts say that you should consider applying for an unsecured business credit card before attempting to land a secured account.

First of all, it's important to understand the differences between the two types of accounts. With a secured credit card, you offer the bank cash collateral. For instance, if you deposit $15,000, your credit line will amount to $15,000. You may be paid interest, but not necessarily. Such an account ties up your cash because you can only get a hold of it if you close out your account.

In sharp contrast, an unsecured business credit card is similar to a consumer credit card. In other words, no collateral is required. Your credit limit will be based on your income, credit history, and the credit market. If you fail to make payments on the account, your credit rating will suffer, but chances are you won't lose your house as a result.

Of course, you'll be limited in how much you can charge with an unsecured business credit card. That's actually as it should be. The last thing you want to do is amass a large credit card bill that you cannot repay. It's important to keep in mind that if you're a good customer, your credit line should be raised after a couple of years. If the raise is not automatic, you should request it.

In addition, you can do some comparison shopping to get the unsecured business credit card that offers the best rate.

That way, you can ensure that you are getting your money's worth. Still, you should resist the urge to max out your credit card, no matter what the interest rate may be. Unsecured debt can be a drain on your bottom line and can ultimately affect your profitability.