How to Get Unsecured Small Business Loans
There are different types of loans available and you may be wondering how to get unsecured small business loans and whether they are a good option. An unsecured business loan is one that does not require you to have collateral to back it up. This can be an ideal solution for small businesses that lack the assets necessary for a secured loan.
Like any type of small business financing, there are advantages and disadvantages. It is important to shop around for the best rates and terms before making the choice that is right for your small business.
Is it Possible to Get an Unsecured Small Business Loan?
You can apply for an unsecured small business loan from a traditional bank or alternative lender. However, you should be aware that they are not easy to get.
When a loan is unsecured, the lender has nothing except your word that you will repay the money. Therefore, only those with stellar credit ratings tend to get approved. This at least allows the banker to rely on your past credit history.
Often, the most you will walk away with is an unsecured business line of credit. A line of credit works similar to a credit card, where you only repay the money you actually use or withdraw each month, plus any interest or fees.
Other Options for Small Business Funding
You can choose to look for other sources to finance your small business. These include a home equity line of credit, short term business loans from family or friends and finding investors.
Another option is a cash advance company, like Financing Solutions (www.fundmypayroll.com). They will purchase your account receivables and give you the fast business financing you need without having to wait 30, 60 or 90 days for them to become due.
The money can be used for any business expense, such as making payroll, purchasing equipment or building a working capital nest egg. You can repay the funds quickly, typically in a few weeks or months, when your cash flow is stronger.
Best of all, the application process is quick and easy. You will receive an answer regarding your application in less than a day and have the instant business financing you require within 48 hours.
Pros and Cons of Unsecured Small Business Loans
It can be difficult for most small businesses to obtain a traditional loan from a bank. They involve lots of collateral that many small businesses just don’t have. Thankfully, there are unsecured small business loans available.
There are several advantages to an unsecured small business loan. For example, because you don’t put down any collateral, there is nothing the bank can take away if you have difficulty repaying the money. Another plus is that if you ever need to file for bankruptcy, your unsecured business loan may be dismissed.
With all the advantages of an unsecured small business loan, you might be asking why every entrepreneur does not choose this option. It’s due to the numerous drawbacks to unsecured small business loans.
For one thing, the interest rates tend to be much higher with an unsecured small business loan. Lenders are taking a risk on you because there is no guarantee that you will be able to repay the loan, so in return, they ask you to pay more. It is also important to note that, unlike secured loans, the interest on an unsecured small business loan cannot be deducted when tax time rolls around.
Also, there are variations in the type of unsecured small business loans available. Some have a fixed rate and others fluctuate. Additionally, you may be able to get an unsecured small business loan that works like a line of credit which can be repaid as you use the funds.
If this all sounds a bit complicated, that’s because it is. Do yourself and your small business a favor and turn to Financing Solutions instead. It will save you time, money, and peace of mind.