Unsecured Small Business Loans

Unsecured small business loans are used by those who wish to start up a new business venture. These loans are called unsecured because the lender doesn’t require the borrower to place any type of collateral on the loan as security. Secured loans are often for a greater amount than unsecured due to the fact that the lender can claim the collateral should the borrower default. Unsecured loans are a good choice for those who are just starting out but don’t have any property to place on the loan as collateral. Many lenders are often apprehensive about granting unsecured small business loans as they have more risk.

As unsecured small business loans are much riskier investments, it is extremely important that consumers prepare for their proposal to enhance their chance of approval. Potential borrowers should create a proposal that clearly details the goals the individual has for their business and thoroughly explains why they need the loan. The lender should read the proposal and have a full understanding of how the borrower will spend the money and be able to see a complete breakdown that fully explains how much money will be required. You should also provide the lender with full details regarding the business such as the business profile, organizational structure of the business, and background market research. You’ll want to present yourself as responsible, committed, as a business owner with integrity, good character, and a solid business plan. Those who can prove these qualities and traits to a lender stand an excellent chance of being approved for unsecured small business loans.

A good resource for anyone beginning a new small business is the Small Business Administration. The SBA also has their financing resources and you may find that obtaining a loan through the SBA is much easier than anticipated. It’s important to realize, however, that as there is more risk to the lender with unsecured small business loans, lenders will pay close attention to your credit score and history when making their decision. Additionally, since there is no security or collateral required with these loans, borrowers should be prepared to pay a down payment on the loan. Additionally, unsecured small business loans often have higher interest rates than secured loans.

Many borrowers feel that a new business is a risk in itself, therefore they don’t want to put down large collateral such as their home. Should a business fail and a borrower default on a secured loan, the lender will claim the collateral. For this reason, many feel that it is better to pay the down payment or higher interest rates and obtain an unsecured loan. As new businesses are without assets or equity, unsecured loans make the best choice.

No two lenders are alike and you can’t assume that all unsecured small business loans will come with the same interest rates. Make certain to take the time to perform your research and compare different lenders to find the policy with the best rates that will provide you with a loan that will meet your needs. The Internet can enable you to find a thorough listing of potential lenders with which you can apply. Since your past credit is an important factor in qualifying for unsecured small business loans, it is a good idea to take the time needed to repay any outstanding debts and ensure the information on your credit report is correct, updated and accurate.

Make certain to take the time to research what type of information the lender will need from you in order to increase your chance of being approved. Ensure that your business meets all of the legal requirements necessary to qualify for the loan.

Unsecured small business loans can help you get your business up and running. Do your homework, prepare a great proposal, then begin the process of meeting with various lenders to get the funding your business needs.