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Unsecured Business Loans

Collateral - A borrower's asset that is given up to the lender if the borrower is unable to pay back the principal and interest on the loan; making the lender the new owner of the collateral.

Credit Score - A numerical expression based on the analysis of a person's credit files, to represent the perceived likelihood that the person will pay debts in a timely manner.

These are two terms that one must be familiar with when contemplating a business loan, simply because banks consider both of these when determining whether or not to approve the loan. Many small business owners may not have one or the other (sufficient collateral or a high credit score), leading them to search for unsecured business loans, which only require borrowers to posses one of these requirements.

An unsecured business loan is a business loan that is not backed by collateral. In most cases, this leaves unsecured business loan lenders to rely solely on the borrower's credit rating. Collateral serves as a means for the lender to get back the money that they have lent, should the borrower default on the loan. It is a back-up plan for lenders to make sure that they get their money back no matter what. If a borrower does not have collateral, a lender may require the borrower to have a near perfect credit score. This is because the lender can only rely on the borrower's past borrowing and repayment habits to determine if he/she is likely to repay the loan. Consequently, it is virtually impossible for a potential borrower with a low credit score to receive an unsecured business loan, because their credit history suggests that they will not repay their loan on time, if at all.

However, there are lending companies that offer a different kind of unsecured business loan; one that is not based on the borrower's credit rating. These lending companies provide a type of unsecured business loan called a merchant cash advance. A merchant cash advance is a lump sum of cash given to a merchant in exchange for a small percentage of the business' future credit card receivables.

Since a merchant cash advance is based on a business' future credit card receivables, rather than the borrower's credit score and/or collateral, it can only be utilized by retail business owners who process credit card transactions.

Additional requirements may vary from lender to lender. Generally, a merchant must not have any unresolved bankruptcies or tax liens to be eligible to receive a merchant cash advance. Also, lenders may require merchants to process anywhere from $2,500 to $5,000 in monthly credit card sales for four months to one year before approving a cash advance. Merchants are also usually required to have at least one year remaining on their business' lease.

A merchant cash advance can be a great alternative to a bank loan. Most lenders are able to provide loans from $5,000 to $500,000, depending on how much money a particular business location receives in credit card sales each month.

If you are one of the many loan-seekers in search of an unsecured business loan, choosing a merchant cash advance may be a very lucrative decision, especially if your credit score is not great. If you meet the minimum requirements (owning a business that processes credit card sales), consider researching the existing merchant cash advance lenders, and find out if a merchant cash advance is the unsecured business loan for you.

Startup Your Business With A Business Loan

It is not necessary to wait until you have a lot of money to start up your business. The time is now. The market may change and make things difficult and you could be left with the bitter taste in you...

It is not necessary to wait until you have a lot of money to start up your business. The time is now. The market may change and make things difficult and you could be left with the bitter taste in your mouth of not having taken the decision at the right moment. Business is not only about buying and selling. It is about taking the right decisions at the right moment.

Do Not Let Others Beat You To It

If you have detected a niche in the market that you can fill in, go for it. Do not waste time watching to see what happens, whether it is the right moment or not. Waiting gives your precious time to others. Rushing to do things without a proper planning is not good either. You have all the ideas in your head, so just write them down, on paper or on your computer and make a checklist of everything you need to open your business.

Niche Marketing

Your first attempt should consider every nail and every sheet of paper needed to get your business going. There will always be time to cut down on unnecessary things later on. I talked about a “niche” above, because niche marketing is very interesting. Once you detect the niche and the needs it has, you tailor a product or service for that niche and you already have a market, without having to spend precious cash on random advertising. What little advertising you will have to carry out, will be specifically directed to your niche.

You will have time later on to expand and add products to your line, innovate and improve, to widen your scope, a little at a time, so as to grow steadily and firmly and surpass the critical moment. It is said that 80% of new businesses do not make it through the first year.

Start Closing The Circle

Once you have your business plan ready, you can start to think of a business loan. Considering what is mentioned in the previous paragraph, every lender knows the risks that a new business implies. So, this risk will have to be shared, in the form of the provision of some asset of yours, whether private or dedicated to the business, to show confidence in your own project.

Very few loans will be granted on the business plan alone, however brilliant it may appear, so bear this in mind and place your car, truck, a piece of land, whatever it may be, as collateral from the very beginning. Do not wait for the lender to ask for it.

Some Additional Considerations

When you start to fill in the numbers in your business plan, consider the loan payment in advance. If you take the trouble to calculate how much you need and how you will repay it, making it participate in the general cash flow, it will give the loan officer a good impression. For this, you will need to shop around and get free quotes, not to be confused with applications.

The interest rate will vary slightly from lender to lender and depending on the amount and collateral you offer, but in general there is no great difference. The main difference in these matters is your decision and how you prepare your way for your new activity.