Get to Know Your Unsecured Business Loan Options

For many small business owners, unsecured business loans are the most accessible method of financing available in the market.  Because these loans do not require collateral, it is technically easy even for business owners who do not have valuable assets. 

For many small business owners, unsecured business loans are the most accessible method of financing available in the market.  Because these loans do not require collateral, it is technically easy even for business owners who do not have valuable assets.  This article presents your options when in need of an unsecured business loan.

What to Expect

Lending companies extend business loans without requiring collateral because not everyone can qualify for a secured loan. However, unsecured business loans are often limited only to a small amount of financing ($50,000) and do require the applicant to have good or impressive credit.

If you are an owner of an established business with good business credit, applying for an unsecured business loan should be easy.  Needless to say, lenders are looking for a solid assurance that you are capable of repaying the loan according to your lender’s terms and conditions.  Because no real property has been submitted as guarantee for the debts you owe, lenders would be evaluating your loan application based upon the merits of your credit history.

But what if you are the owner of a new or a start business?  What if you have yet to establish business credit?  In reality, it can be a big challenge to get approved for unsecured business loan.  Without business credit to back you up, it will be more difficult to convince a lender to finance your business needs.

The same is true for businesses with a bad credit history.  Although it is possible to find lending companies that offer unsecured business loans for bad credit, the available loan amount would be limited to a smaller value and the interest rates would be much higher than standard unsecured loans. 

How to Get Approved

If you want to apply for an unsecured business loan, it’s important to do extensive research first and get to know all your possible options.  The only way you can be certain that you are being offered a good deal is by comparing different lenders. 

Look out for predatory lenders who are only after one thing - making profit in the expense of borrowers.  Some lenders may take advantage of you particularly if you have bad credit and cannot qualify for standard loans.  You may be offered instant approval regardless of your credit rating.  Is there a catch? The catch is that you will be charged with expensive interest rate and fees all throughout your repayment term.

Make sure that you are dealing with a legitimate lending company before submitting your loan application.  Understand the process involved and the necessary paperwork that you need to prepare.  Do not try to use false information in an attempt to get approved as such a move will only complicate your situation. 

Do not submit multiple applications at once.  Instead, weigh your options carefully and submit only an unsecured loan application to the right lender.  Keep in mind the each time you submit an application to a lender, an inquiry will be made in your credit and all inquiries will be reflected in your report.  Such a move can send a negative impression to a potential lender.

Guaranteed Unsecured Loans: Hassle-Free, Affordable Financing For Your Business

Obtaining financing for business, especially in a start-up stage, is a headache for many business owners. A very simple financing scheme allows acquiring guaranteed unsecured loans with competitive interest rates and high amounts.

Unsecured business loans are great for starting or expanding a business, yet are rather difficult to obtain. Banks see unsecured loans that newly formed businesses wish to take as an extremely high risk, and therefore often refuse to grant them. If they do, the loan provisions are often very unattractive as banks assign high interest rates and restrictive terms to limit their risks. However, there is an easy way around it, allowing borrowing large amounts at decent interest rates – guaranteed unsecured loans for business.

How Are Guaranteed Unsecured Loans Different

How are guaranteed unsecured personal loans different from regular unsecured loans? Unsecured loans do not have any collateral requirements, i.e. they do not require the borrower to put up any property to secure a loan. Unsecured loans are purely credit based, and banks give borrowers money just based on their past credit track and on the written promise of repayment. As unsecured loans mean less default protection for banks, they offset their risks by restricting the loan terms by enforcing shorter durations, lower amounts, and higher interest rates.

How Guaranteed Unsecured Loans Work

Guaranteed unsecured loans, while having the same features as regular unsecured loans, are considered as less risk by banks as they have an added layer of safety in form of a third-party guarantee. The way it works is that a borrower asks another party, whether it is an individual or a company, to issue a written guarantee of repayment should a primary borrower fail to honor financial obligations. Simply put, guaranteed unsecured loans are cosigned loans. As these loans pose fewer risks for lenders, they are often willing to offer competitive interest rates and grant higher loans amounts, allowing the borrower to benefit from lower monthly payments and reduced borrowing costs. Another benefit of guaranteed unsecured loans for business is that there are no collateral requirements, making them perfect for people who do not wish to risk their property, or for the ones that do not have any suitable assets to satisfy the collateral requirements set by the bank.

How To Secure Guaranteed Unsecured Loan For Your Business

The problem that many people face when applying for guaranteed unsecured loans is finding a cosigner for the loan. The easiest solution for this problem is to set a guaranteed unsecured loan for your business. In this case, a business is going to be a primary borrowers and a business owner is going to be a cosigner. It is noteworthy that such scenario is only possible when a business entity is completely separate from the business owner; therefore, sole proprietorships do not qualify. Limited liability companies and corporations are the best entity types to set up in case you intend to use guaranteed unsecured loans.

If you need a guaranteed unsecured loan for your business with tolerable interest rates that would not break your bank and decent amounts that would help to finance your business activities, you need to follow simple steps. First, you have to ensure that you have your business accounts set up completely separately from your personal accounts. Second, you have to find several lenders in order to get the loan quotes. Lender search may be easily performed online or through a loan broker who would be able to match you with few lenders. Last, you would have to select a guaranteed unsecured loan offer that best suits you business financing needs.

A Business Financing Alternative - Unsecured Lines of Credit

Sources of unsecured financing still exist for qualified business owners that previously relied on real estate equity to support their business expansions and to provide working capital. Despite recent financing cutbacks by major banks, here's is a strategy for successfully being approved for an unsecured business line of credit.

Unsecured Lines of Credit are an excellent financing alternative that business owners can utilize to replace their frozen home equity lines of credit. These lines of credit will be more advantageous than business loans because, like credit cards, interest is paid only on the outstanding balance. With two years in business and a 680 or above credit score, business owners qualify for up to $1 million with full documentation. Applications can be approved for up to $350,000 with no documentation.

Unsecured Lines of Credit can be obtained in roughly 4 to 6 weeks but should never be applied for directly by the borrowers themselves. The borrower, although qualified, cannot simply walk into a lending institution or bank for an unsecured line of credit and automatically be approved. Companies that specialize in unsecured lines of credit are available and should be contacted to assist with the substantial preparation that is necessary. It is highly recommended that the business owner seek out a professional business finance consulting firm with contacts and affiliations with several banks and financial institutions that offer these programs. The application process is somewhat complicated and documentation must be properly formatted and compiled to avoid unnecessary rejections.

Business owners can no longer rely on the equity in their real estate holdings to finance their business expansions and growth. Despite the fact that they paid high fees for the availability of home equity lines of credit, even business owners with excellent credit scores and excess equity in their properties are finding it impossible to access their credit lines. The main reason is that banks have virtually stopped providing homeowners access to the equity in their properties as lines of credit. Home Equity Lines of Credit have been frozen by most major lenders because declining property values have made these cutbacks necessary. IndyMac, Washington Mutual and other major mortgage lenders have made decisions to rescind these credit lines, according to the terms of their contracts with borrowers.

These recent eliminations of access to funds for their businesses have hit business owners especially hard. Many of them have used home equity lines for working capital during slow periods or as sources for cash during periods of expansion. The net effect is that the necessary funds for business uses were expected but are not available. The lack of time to make other arrangements because of this sudden policy change can severely impact a business owner's ability to survive a shortage of funds. There are also business owners who paid back their credit lines in the anticipation that they would be able to utilize them again. That option is no longer available, leaving them without their usual funds.

In summary, Unsecured Business Lines of Credit are methods of financing that are still available to qualified borrowers who are also business owners. Firms that specialize in acquiring unsecured lines of credit should always be involved in this application process. The applicant will need assistance in properly preparing and organizing his documentation for submission to lenders. A firm that specializes in this type of financing will be able to present the borrower as the "perfect applicant" because its business is to assure that all aspects of the application adhere to the current credit, submission and underwriting guidelines of each individual bank. This very important initial step in the process will greatly enhance the business owner's potential to be successfully approved for an unsecured line of credit.