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You might want easy access to business loans for a variety of needs, from expanding your premises to purchasing new equipment. What is critical is to choose the right size loan from the right lender. Look up various sources for business lending so that you can secure an unsecured business loan without jeopardizing your personal or business interests.
Unsecured business loan
In most cases, this happens during the startup phase. It is essential that you project an in-depth analysis of your market and projected earnings. Previous experience in the industry would stand in good stead. If there is personal financial commitment by the owners, it indicates the levels of involvement.
What do lenders look at while assessing your need for unsecured business loan? The company credit and outstandings must be satisfactory. Prepare detailed future projections on cash flow. Enumerate the kind of collateral that can be provided in the form of valuable equipment, real estate or other property. A key index that is examined is the 'debt-equity' ratio - the ration of your total debt to the equity held in the business.
Look for banks that are willing to lend at better rates than those offered by other lenders. Banks tend to more conservative and they may demand more collateral and lower debt-equity ratios. You can try for an unsecured business loan with the help of brokers who can aid in the process. But factor in for the broker's fees. Look for any prepayment penalties. Repaying early can bring down your debt substantially.
Short term loans are lent to business establishments for a period of one year or less. Typically they are repaid in full at the end of the term.
Term loans are lent for longer periods and are usually for larger amounts.
Equipment financing loans are easier to obtain since there is direct collateral in the form of purchased equipment.
An unsecured credit line is one way of seeking unsecured business loans. This allows you to draw on your credit as and when you need it. Typically this kind of unsecured business loan is given sans any collateral based on the individual credit worthiness of the business owners. This type of unsecured business credit works well to hedge against possible cash flow problems. But remember that this flexibility comes at added costs, if not repaid in time.
Sometimes some business firms use their future receivables to factor for loan. You can receive nearly 80% of the value of your invoices. Personal loans taken against credit cards also serve as business loans. Often such loans are taken as home equity or asset-based.
Typically these are the following documents that most unsecured business loan lenders require so as to process your loan application:
Latest Balance sheet and income statements
Personal financial statements of the owners
Personal credit scores of the owners
All insurance coverage carried by the business and owners
Business and personal tax returns for last 3 years