What is an Unsecured Small Business Loan
Business owners, especially those with good credit standing have access to credit. They have different financing options depending on what their business requires. From secured to unsecured business loans, you should be able to weigh your choices and choose the best type of loan.
So, what is an unsecured loan? From the name itself, it is a type of loan that does not require the borrower to have any collateral. Lenders offering unsecured business loan look at the creditworthiness of the individual or business owner.
What are the Terms and Qualifications?
The terms in getting an unsecured business loan may vary depending on the company where you intend to apply for a business loan. The loan amount is usually up to $50,000 but may go as high as $500,000k. Repayment term is from 1 month to 3 years. How about the time it takes to get the fund? It can be quite fast. In fact, you can already get it in 1 to 3 days.
In terms of qualifications, you need to have at least $100,000 in annual revenue. Your business should be in operation for more than a year. Last but not the least, it always helps if you have a good credit standing.
How to Apply for an Unsecured Business loan
After weighing your options and you have decided that unsecured business loan is the one to get. The next step is to familiarize yourself with the application process. There are various types of unsecured small business loans that you need to know. These include the following:
- Personal Loans
To apply for a personal loan, you can actually apply online. Lenders offering personal loans may vary depending on the standard that they offer. Once you are eligible for the loan, your loan undergoes the underwriting process. They will assess your financial capacity for the loan. The process takes about 3 to 10 days.
Requirements need include:
- Proof of income
- List of monthly expenses
- Use of funds
- Social security number
- SBA Loans
For an SBA loan, the loan takes about 45 to 120 days before you can get the funding you need. With this type of loan, you basically work with a traditional lender who does the underwriting process. One of the disadvantages is that the application process can be quite slow and a lengthy process. If you are not in a rush, this might be your best bet.
The documents needed for SBA loans include the following:
- Details pertaining to the allocation of funds
- Business plan
- Projected business financials
- Current business financials
- Cash flow statement with projections
- Personal tax returns
- Financial statement of the owners
- Business license
- Business Credit Cards
Another option is to go for a business credit card. You won’t have a hard time applying since you can just apply online and provide the information required from you. Bans have their online system that will assess your profile and evaluate as to whether your application is approved. Once your application is approved, you can get your card in 3 to 10 days.
To get any business credit cards for bad credit, you will be required to submit the following:
- Business tax ID number
- Details of business revenue
- Complete details of your business
- Rollover for Business Startups
This is technically not considered a lot. But the good thing with rollover for business startups is that they don’t check your personal credit. You partner with a ROBS provider who will assist you all throughout the process.
How to Get Started
Before you even make that decision as to whether you should get an unsecured business loan or not, it is important that you know that steps. So, how do you get started
- Step 1: You need to know what an unsecured business loan is and how it differs from the secured business loan.
- Step 2: Take the time to weigh unsecured business loan options. Keep in mind that there are a lot of companies offering this type of loan. But the question is, how many of them are legitimate?
- Step 3: Once you have already filtered the company, the next step is to determine as to whether you are eligible to apply for the loan.
- Step 4: After preparing the requirements and other documents needed, you can easily apply for an unsecured business loan.
Secured vs. Unsecured Business Loans
With secured business loans, it means that you need to have collateral. In the event that you fail to pay back the loan, your lender has every right to seize the asset in lieu of the unpaid debt which can be a very stressful thing. On the other hand, if you will opt for an unsecured business loan, you don’t have to use any of your assets as collateral.