You may have a great idea for a business in mind, but no way of getting your company off the ground. If you’ve no money in the bank and no investors willing to help you get started, your only other option is to opt for a business loan. Getting a small business loan without collateral can be difficult. But there are ways to secure finance through alternative lenders.
Healthy Credit Score – If you’ve no collateral to offer a traditional lender such as a bank, you’ll struggle to secure a business loan. Before you apply for finance from any lender, it is important to clean up your credit score. Having a good credit report will help you on the road to getting unsecured start up business loans. The best way to do this is to pay off as much debt as possible and limit further debt liabilities.
Business Plan – Although most non-bank lenders won’t ask for a business plan, it is definitely something that comes in handy when applying for an unsecured business loan. It is an asset if you decide to go for peer to peer financing options. A business plan shows that you’ve carefully thought about the business and you’ve strategies in place to ensure it grows. It will also show present and future predictions, the purpose of your business, and how you plan to invest your money.
Research the Subject – You’ll find that traditional banks don’t normally approved start up business loans when the applicant cannot offer any collateral, there are other options – alternative lenders. If you cannot offer any collateral, it is always going to be challenging to secure a loan. But you will find lenders who believe in your business.
Cash Flow Projections – This is intricately linked to your credit history. Before you apply for an unsecured business loan, make sure you keep an eye on your cash flow to ensure you can pay for the loan once it is approved. If you’ve a poor credit score, you’ll still be able to get approved for an unsecured loan, but it will be at a higher rate.
When you want to start a new business or develop your company, it can be a real challenge to secure a loan without any collateral. Traditional lenders like the bank or credit union won’t give you a loan if you’ve no assets to offer as security. Your best option is to follow the points raised above and apply through an alternative lender.