Getting Unsecured Lines of Credit for Your Business
Small business owners often look for ways to grow their company, pay unexpected bills, and worry their way through a short downfall. An unsecured business line of credit may be the answer, but if you are interested in obtaining one, don’t wait until the last minute to see if you are eligible.
What Are Unsecured Business Lines of Credit?
An unsecured business line of credit is not secured by any specific business or personal collateral. Nothing tangible is pledged to secure the repayment of the loan if you should neglect to make timely payments or default on the loan.
Although it is called an unsecured loan, there are often guarantees associated with an unsecured business line of credit, so it should not be taken out frivolously. The security comes in the form of your guarantees that allow the bank to sue you, personally, and your company, in the care of default. This means your personal and corporate assets are the actual security if the lender wins a legal suit.
How Do You Prepare to Get Unsecured Business Lines of Credit?
- Get to know your banker and keep a positive banking history. This includes a positive daily balance that establishes your business as one with a positive cash flow.
- Register with all business credit agencies and check your scores often. Knowing what your credit scores are and where the weaknesses can help you improve them.
- Prepare a business plan that specifically states the reason you need the line of credit. Include a review of what your business does and how you plan to use the monies. Note personal credit scores if exemplary to show you work well with budgets and pay your bills on time.
- Apply for vendor credit with a Net/30-day payment schedule to establish credit. Pay on time to obtain positive credit feedback.
- Apply for cell phones to be billed to the company to establish business credit. Pay on time.
What Are the Next Steps in Obtaining Unsecured Business Lines of Credit?
There are many types of lenders willing to back small business owners in the modern marketplace. The next step is to choose the right lender, loan, and terms to fit your needs. Here are just a few:
- Credit Unions/Community Lenders
- SBA (Small Business Administration) government backed lenders
- Micro-Loans from non-profits
Once you have decided which company you want to work with, make an appointment to talk to a loan officer. Then begin to establish a rapport with the lender through that individual. You are now on your way to securing an unsecured business line of credit.