Despite what you may have heard about unsecured loans they continue to remain one of the easiest and affordable options for small businesses. Since your business credit will play a large role in your ability to acquire financing for the business, you need work with multiple lenders to find one that is able to provide you with a decent interest rate.
Unsecured loans are not the only option out there if you have bad credit. You can still acquire other loans like secured loans for a low interest rate, but the lenders that will work with you are limited. For businesses unsecured loans can provide you with the needed financing to expand your business or to purchase inventory and other things. Unsecured loans generally are less than $10,000 and the interest rates are usually upwards of 20% and the loans generally last from 3-5 years.
Why are unsecured loans considered a popular tool for businesses? The biggest reason is because you don't need collateral to secure the loan. You just need to provide information pertaining to your business credit along with a few other things and your signature and you have the loan. There are no limitations on the loan and you can use it however you like. If you default on the loan, you break the agreement you signed with the lender and they can call in your loan and send your account to collections but there is nothing that can force you to actually pay the loan.
Unsecured loans put all the risk back to the lender. Since they do not have assets to claim they rely heavily on your personal credit and business credit. If you are seen as a low risk, they will take a chance on your company and can offer you the loan. The high interest rates are typically seen as the "collateral" for the loan because the lender can usually make back their investment in a short period of time due to the high interest rates.
Having a high personal credit score is your best option for unsecured loans. Lenders will reward borrowers that have credit scores above 750 but they may still work with you if you have a credit score of at least 680. Higher business credit ratings will also help you acquire the loan in a timely manner. Typically the loan approval process will take just a few minutes depending upon the amount of financing you are asking for.
Request at least 3-5 different quotes so you can compare the rates on the loan and to find a lender that can offer you everything you need. Even though your credit may be less than perfect, you don't have to pay the high interest rates if you will shop around and find a reputable lender that will review all of your information and provide you with a good loan.
Unsecured credit cards are another great option you have for your small business. Like a unsecured personal loan, the credit card allows you to borrow up to a certain amount with a higher interest rate. The nice thing about an unsecured credit card is that you can continue to borrow from it once you pay down some of the debt. The lender may also provide you with additional benefits like skymiles and other rewards. Just be careful about hidden fees with unsecured credit cards as it is common to have annual fees on business credit cards.
Unsecured loans are a great solution for your small business needs. By working with the right lender you can acquire the money you need to expand your business or fix cash flow problems.
Corporate Credit Concepts specializes in unsecured loans. For more information about unsecured loans and how it might benefit your business, please CLICK HERE for a free phone consultation.