If you run a small business you will need to borrow money from time to time. Alternatively, you can try to obtain venture capital, but that comes with its own disadvantages. Also, for certain things that don’t really tie in well to an asset backed loan, an unsecured loan is usually necessary. We will be discussing the unsecured small business loan process in today’s article.
First you must prepare your company for approval. If you need immediate funding this may not be an option, but it’s always best to get your company in good condition for loan approval. One thing to do is to improve your businesses credit score by running your net 30 arrangements (and similar agreements) through you credit whenever possible. Remember, your business credit is separate from your personal credit and runs on a 600 point scale. Also, you’ll want to increase your revenue to expense ratio as much as possible, lenders like to see you have some wiggle room when it comes to being able to repay your debt to them.
So, let’s assume you’ve got your company as prepared as possible, what should you do next? One of the best resources I’ve found to help new small businesses get unsecured loans is the SBA. The small business administration of America was established to assist small companies get the funding they need. Not only can they assist you in preparing a well organized business plan, they can also put you in touch with lenders that are a good match for you and your circumstances.
Once you are in touch with some likely lenders you will have to go through their approval process. Make sure to ask a lot of questions about the interest rate and fees on the loan. If you don’t understand something make sure to ask, and get 3rd party assistance whenever possible. Make sure to stay within the limits you set for yourself and only borrow under conditions you are comfortable with.
So, once you’ve prepared your company by improving your credit score and lowering your month to month costs you’ll want to find a good match lender. The SBA can be a great resource in further preparing your company and helping you obtain an unsecured small business loan. Finally, you’ll have to meet the specific guidelines of whatever lender you decide to deal with. Make sure you understand the contract in full before signing anything.