More than 80% of small businesses need to borrow funds to finance their growth. If you’re the owner, chances are pretty good that you’re a part of that majority. All businesses need cash to expand, especially in the early stages, and loans can be a great help-whether you’re shifting to bigger office, hiring new employees, or purchasing new equipment or even refinancing debts.
You might be thinking why not apply for line of credit, well it is great for smaller, and more frequent purchases, unpredicted emergencies or cash flow gaps, but a term loan won’t tie you up with your credit if you invest in bulk. If you have few big ways to use funds in your mind, then unsecured business loans are probably just right for your business.
So, now that I have convinced you that unsecured business loan can be a smart option when you want to invest in renovation, shifting or marketing. As it seems that there are endless number of type of loans available today, I am going to talk about unsecured loans, which can be useful particularly if your business is younger than a few years.
“Securing” a Loan
Most business lenders will ask you to put down collateral in order to take out a loan. In simple words, you’ll need to secure the loan by providing lender the rights to sell some assets in the event that you default on your loan. Therefore, putting down a collateral, which is anything that can be turned into cash, allows you to decrease the lender’s risk. They will hold a deed or title to your asset until you repay the lender fully.
So, what can you do if you’re not able to post collateral? Many small business owners find difficult to post a collateral. Usually, they are younger people who don’t own a house or have any other thing in type of asset. These people need to find themselves the kind of business loan that let them present as collateral. So, these type of people needs to lean on their credit scores instead of assets to secure a loan. These loans can be hard to find, but I can assure you that they are out there and they can be valuable resources as long as you fully understand them.
Collecting Your Advance
Once, your loan has been approved, it will take short time for those money to reach your bank account. For short-term loans, the money will be in your bank account less than 24 hours. Even for the long-term loans, it takes maximum a week for money to reach your bank account. And, these money lenders pride themselves on their a fast and easy processes, so as long as your paperwork is ready, your loan application won’t take long as you expect.
Also, remember that the factor determining your loan eligibility is the main purpose of the loan. The term loans require you to apply with a particular goal, whether to expand your business or to increase inventory. The inventory goal is short-term one, therefore the term loan be also be shorter, where expansion loans are longer process which will require a longer loan.
As this online loan market can be a bit tricky to navigate, I hope this guide has been helpful for understanding how to choose the right loan for your business. Fortunately, if you opt for a small business loan and replay on time, it will have a dramatic impact on your business’s credit score, which makes it easier to secure big loans at lower interest rate in the future.