Obtaining an Unsecured Business Loan In Todays Economy

Every business owners comes to the realization at some point that if they only had access to more money than their business would take off. Unfortunately most start up businesses doesn’t have enough business credit built up to qualify for an unsecured business loans on its own.  Nor does it have any assets that you might use for collateral.  Most of them were used just to open their doors. 

 

An unsecured business loan can be simple to get if the business owner is willing to give a personal guarantee and has REALLY good credit.  In 2008, it was fairly easy for a ANY type of business to obtain an unsecured business loan.  You just needed a credit score of 680 to qualify for up to $100,000!  It could be in your account in 3 - 5 business days!  Money was plentiful and easy to obtain.  But after the financial crash, unsecured business loans became extremely hard to get.  Mainly because a lot of banks made bad loans and went out of business. 

 

What made unsecured business loans so popular was the same thing that brought about their demise.  Banks didn't obtain any sort of collateral behind these loans.  They were basically signature loans for business owners.  Often times all they needed was good credit.  Not excellent, just an average credit score.  The banks needed a 1 page application.  And that was it!  These loans were open to start up businesses with no track record and unfortunately as the economy went down, so did these businesses. 

 

Now business banks are starting to issued unsecured business loans again.  But the credit requirements have gone up to a 720 average.  And with a 720 you would only qualify for around $10,000 not the $100,000 of yester-year! 

 

If you are looking for unsecured loan to help your business with its working capital needs, they are still out there but the requirements have changed, as has the application process.

 

1. You need to be realistic in your expectations.  Banks that issue unsecured loans are only willing to do so to business owners with EXCELLENT credit.  They learned their lesson from fiasco of 2008 and the banks that are still issuing these loans are the ones that were more cautious when approving customers.

 

2. If you are a start up business, be prepared to provide financial information.  Sometimes its can just be a few months of your business bank statements.  But some banks do require your tax return.  Especially if they are considering approving your business for a large unsecured business loan.

 

3. Make sure you have comparable credit.  We have had business owners apply with excellent credit scores of over 720 but their largest line of credit was $2,000.  Since he wanted a loan of $35,000, the bank of course said no.

 

4. If you have ANY credit blemishes you need to handle them before you apply.  There are reputable credit repair companies like www.creditrepairhelp.com to help you remove inaccurate, old, negative items.  We have had business owners with a 720 credit score but a 5 year old bankruptcy.  The bank rejected them. 

 

As with any loan, you should always shop around to locate the best rate.  When I say shop around.  I don’t mean going online and submitting applications on every website.  You should pick up the phone can call prospective lenders.  Pull a copy of your own credit report to send to them.  Make sure it has your credit score. Understand if they do decide to look at your loan request, they will have to pull your credit on their own. A banks financial credit report will vary from the one you get from consumer sites, but it can give them a good idea of what is on your credit report and how you pay your debts.

 

 

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