How to Receive Unsecured Small Business LoansSeptember 7, 2013 6 Comments
Conventional lenders like to avoid granting loans not backed up by adequate collateral. To them, the stakes are high and there is the possibility of losing money in the event that the borrower defaults in making full repayment of the loan. That is the reason banks would first check up on the credit score of an applicant even before taking a look at any proposal.
However, in certain situations, lenders are willing to give unsecured small business loans to applicants who satisfy the criteria. In most cases, all you need to do is to prove that your business is viable and that you have the ability to make full repayment of the loan. Really, the trick is to know what exactly the lenders are looking for.
What is the state of your credit score? If you have good credit status, you will have more options to choose from and even pay lower interest rate. Start by improving your credit score if it is poor before making an application for unsecured small business loan. Your credit rating matters to most lenders though it may not carry much weight in some instances. If you have bad credit, chances are that your application will get turned down for unsecured small business loan. In that instance, you may need the help of someone who knows your situation and also trust you to be your co-signer before you can get approval for an unsecured loan.
Types of unsecured loans that you can use to fund your small business include signature loans, credit cards, and peer to peer loans. Interest rates are generally higher for unsecured loans. The lender feels justified to charge higher rate because they are at higher risk of losing their money if you happen to default on full repayment. You may also see, alternative business financing for more useful tips.