If you are making the exciting leap toward opening your own business, you’re probably going to need to learn more about business loans. Here a few answers to some frequently asked questions about obtaining unsecured loans to finance your small business.
What is an Unsecured Business Loan?
Unlike a secured loan, this type of loan doesn’t require you to put up any collateral. That means that if you’re forced to default on the loan, the lender will be unable to seize any of your business’s assets without a court order. This protects your personal and professional assets in case your business fails. To make up for a lack of collateral, these loans often carry higher interest rates than secured loans.
How do I Get an Unsecured Business Loan?
As with any loan, you’ll need a good credit history to convince lenders that you’re worth the risk. Since you are not required to put up any collateral, your lenders will be scrutinizing your credit even more closely with an unsecured loan. If you have a poor credit history, you may not qualify for an unsecured loan and should consider other types of business loans.
Will I Need to Submit my Tax Returns, W-2’s, or any Financials?
Most lenders do not require you to submit tax returns or financial records to qualify for an unsecured business loan. However, they do usually require a high credit score to approve your loan.
Are Business Credit Cards a Line of Credit?
Yes, business credit cards are a great way to build your business’s credit rating, which will help you get an unsecured loan. If your personal credit score is too low to qualify for a loan, it’s possible to use a business credit card to establish an independent business credit score over time. As long as you repay the balance in full every month, a company credit card will go a long way toward establishing a sufficiently high credit score, making it easier to apply for unsecured business loans in the future.
What are the Requirements?
To qualify for an unsecured business loan, you must have an acceptable credit score. If one lender turns you down, don’t be afraid to explore your options with other lenders, as requirements vary from lender to lender. You may want to research business loans offered by many different lenders to compare interest rates and repayment plans.
An unsecured business loan could be an excellent option if you want to secure financing for your small business without putting any of your assets up for collateral. If you have good credit and you’re willing to accept a generally higher interest rate, this type of loan could be exactly what you’re looking for.