If you run a small business you may need to borrow funds to pay for your expenses. Certain items work very well for obtaining a secured loan, such as real estate and certain equipment loans. Some items cannot be backed by a loan because they don’t retain enough value. This applies to things like office supplies, salaries, etc. If you are rapidly expanding and need capital to cover a wide range of items, an unsecured small business loan is probably a good fit.
So how do unsecured small business loans work? This depends on who finances the loan and how much the loan is for. If you are looking for a short term loan (say under 6 months) and you need immediate funding, a nontraditional lender may be best for you. You should start your search online and try to find a lender that seems to meet your needs. Some things to look out for; higher than usual interest, very high fees for late payment, any sign that a company is disreputable. You should always double check with the better business bureau before signing a loan agreement or providing personal information to any company you are not intimately familiar with.
If you are looking to get a mid to long term loan (6 months or more) the process is somewhat different. For one, you’ll likely want to get funding from a traditional lender that will be able to provide you with a lower interest rate. Second, you’ll likely have to go through a much more stringent approval process. You may need to demonstrate the good credit history of your business, remember your company has a separate credit report from you own. Also, you need to demonstrate that you have solid yearly revenue, and that you have had solid revenue for a number of years? Have a new or small company? You will want to contact the local chapter of the small business administration for assistance in getting a specialized small business loan. Certain lenders (traditional and nontraditional) have agreed to offer a small subset of loans to small businesses like yours. These loans have competitive rates and are available under much less stringent requirements.
So, if you are looking to borrow money for a short amount of time, to pay for unexpected cash flow issues and emergencies, a nontraditional lender will likely be your fastest and easiest route. On the other hand if you need an unsecured loan to pay for more long term expenses (that can’t be covered under a secured loan) you will want to reach out to someone like the SBA to get in contact with a lender that can fit your needs.