How to Obtain Unsecured Business Loans to Finance Your Small Business?
Obtaining the capital to finance a new start up is probably the hardest part for most entrepreneurs. Unless you are fortunate enough to have inherited vast sums of money from your rich ancestors, you would most probably have a limited capital to invest in the business. You have to borrow the rest from a bank or a financial institution.
But the problem is that most money lending institutions prefer not to offer loans to individuals who cannot provide collateral to the loan. So, how can you obtain a loan for your business in such a situation? How can you secure the much needed capital for your start up firm when you do not have the required assets to offer as collateral to the loan?
The answer is to apply and qualify for an unsecured business loan.Here we will walk you through the steps you can take to qualify for an unsecured loan.
Advice and Tip to Qualify for An Unsecured Business Loan
As an entrepreneur, you should realize that you have two options to obtain the loan. You can borrow funds based either on your personal capacity and guarantee or on the soundness of your business.
The latter is the preferred option in case you do not possess the required assets to offer as collateral to the loan. In business terminology, it is known simply as an unsecured business loan.
1. Run Your Business as an LLC (Limited Liability Company)
In order to qualify for the unsecured business loan, you need to keep a separate business identity. For this, the owners must run their business in the form of a limited liability company (LLC). This will not only increase the chance of obtaining the unsecured loan but the word “limited” in LLC means that your personal assets will not be put at risk when obtaining the loan.
2. Obtain Relevant Licenses and Permits
Remember that you need to obtain relevant licenses and permits to operate your business. You can obtain these documents from your state, national, or local council. In addition, lenders may also check if you have a business phone number and yellow page listing. These are simple criteria to fulfill that can go a long way in obtaining approval for the unsecured loan.
3. Sound Business Plan
Another great advice to increase chances of obtaining an unsecured business loan is to have a solid well written business plan. The business plan should be comprehensive enough and provide complete detail about the business. In most cases, the lenders are not aware about the industry in which the business operates. It is therefore important that the business plan should be comprehensive and include all such information that is relevant to your business.
Following the above three tips will greatly increase the chances of obtaining unsecured loan for your business. This will also increase the chance of obtaining the unsecured loans on lenient terms and conditions.
Remember that the lender will evaluate your ability to make profit from the business prior to granting approval for the unsecured loan. So, you have to convince the lender that your business plan is viable and that you will be able to attract customers on a regular basis in order to obtain the required funds.
Do you need further information on how to obtain unsecured business loans? If so,you are welcome to leave a query in the comments below or enter your contact details here.