Loans and Credit for Small Businesses Gaining Ground in Basking Ridge
Mike is interested in a small business unsecured line of credit but does not know how to get started. He tried to talk to a number of the bankers in his local area, but they are very pushy and do not seem to be able to answer his questions.
He found our site in a local online directory and decided to give us a call. Mike explains that he has been struggling to get an unsecured business line of credit with bad credit. Ben tells Mike that he will be happy to get him a small business unsecured line of credit with our easy 1-minute application process.
If you’re looking for a way to fund your small business, an unsecured line of credit may be the answer. A small business unsecured line of credit is an agreement between a bank and its customer whereby the bank agrees to extend credit beyond direct deposits or savings accounts. This is typically done in cases where a company has an established track record and seeks additional short-term financing needs to start or grow their business but does not have collateral on hand for the loan request.
Factors that Affect Your Unsecured Small Business Line of Credit Approval
Small business loans are an important aspect of financing for businesses to begin, grow, or expand to improve their financial position. However, without the proper qualifications, it can be difficult to find the necessary funding for your business enterprise. When a loan is approved through your bank and you receive the funds from your interest-bearing account, you’ll need to make certain that you successfully repay these funds on time.
How Much Money Have You Saved?
This is an important factor that can impact your ability to secure a line of credit. If you do not have enough money saved, you will need to rely on loans and other methods of financing from individuals or institutions to purchase or build on your retail or online business venture. The only way to improve your financial resources is if you earn additional income through the sale of products and services, which may include the sale of stocks, bonds, and other investments. You should consider what amounts would be needed for any needed capital that will be used to help finance your small business enterprise.
How Long Have You Been in Business?
This factor can impact your ability to qualify for a line of credit, as new types of businesses have not had a long time to accumulate the necessary financial resources. The amount of time and age of the business will also depend on the size and scope of your applicant business enterprise, as well as the number of employees and related business expenses that may be beneficial for your success. This factor includes the fact that many individuals will rely on self-employment or steady income from another source to help fund their small business venture.
Did Someone Else Invest and Own More Than 50% Of Your Company?
This can be a factor that will affect your ability to secure a line of credit. The reason that this can be an unfavorable factor is that it is a requirement for the lender to ensure that you will be able to repay the loan with interest rates and all associated costs. It’s also important to note that if you do not meet this requirement, then your line of credit may be prohibited from consideration and may not be approved.
Do All Members Have Decision-Making Roles in Your Company?
This is also one of the main factors for your business to secure a small business line of credit. Unexpected expenses or unforeseen operating expenses may arise that you may not be able to cover. If you are the only one having full control of the business, this will be a difficult situation to resolve because if it does not work out, then you will be left without any financial resources at all. Then what would become your option for business? You would have no choice but to close shop and move on with your life.
How To Qualify for an Unsecured Small Business Line of Credit
If you’re a new entrepreneur and the thought of securing a large amount of capital seems daunting, you may want to consider applying for an unsecured line of credit. This is an affordable option that can be both convenient and helpful for those looking to start or grow their small business.
If you’re looking to secure an unsecured line of credit with annual revenue of less than $25 million, the process is relatively easy. In addition to having a strong revenue, a business owner who is seeking an unsecured line of credit must also meet the following requirements:
Besides being a small business with annual revenue of less than $25 million and a sole business owner or entrepreneur, there are additional factors that can influence your eligibility for a business line of credit. These include having a good business credit score, time in business, business tax returns, having sufficient collateral, and providing detailed financial information to the lender.
With this, you can withdraw money from your credit line as needed in as little as two days and up to $1 million with competitive interest rates.
You might already have a business plan, financing, or equity investors that are willing to invest in your new venture, but there are those times when you need more money to grow. The unsecured line of credit is a flexible financing option for small businesses that may need a small amount of capital to expand or re-tool without the risk of not being able to pay it back in full.
You do not necessarily need other business funding options because the unsecured line of credit can help you reduce your risk and speed up the process while you continue running your business.
Unsecured vs Secured Business Line of Credit
There are many different types of financial products available to the consumer. The type of business line of credit or credit card that you choose is ultimately going to be determined by how much risk you want to take on with your money. Two categories can help give an idea as to what type of product you should consider, which are secured and unsecured lines. Secured lines may offer more benefits for those who need a loan but also want some sort of guarantee in case something goes wrong, while unsecured lines could be more beneficial if you do not need any assistance at all, or just need it for a short period.
To have a secured line, the lender will ensure you have access to cash or are producing positive cash flow to make the payments. They will want some sort of collateral in case the borrower defaults on the loan. Many different types of collateral can be used, such as vehicles, real estate, and other property. Some lenders may offer a percentage of your business revenue based on a certain period and if you do not have enough cash flow coming in then you still may have access to funds through this type of product.
To get an unsecured line, you might need amazing credit scores or positive cash flow so that you can sustain any payments and only obtain this type of alternative financing option if it is needed for a short period. Cash flow gaps or cash flow shortages can be a reason for this type of loan.
There are some benefits to both types of lines of credit. With a secured line, the collateral is important in case the business does not pay their obligations or backs out on the agreement, while with an unsecured line there is no collateral involved even if they default. With a secured line, you can make partial payments to decrease your interest and still be able to use the loan without having to reapply for it every year. This may be beneficial if you do not have all the money that you need at any given time since you could still get access to some funds when needed.
Small Business Unsecured Line of Credit Requirements
Lenders can require different collateral, but below are some of the forms of collateral they would accept, such as real estate, vehicles, cash, and financial securities.
Secure Collateral: Real estate is the most common form of collateral. Other forms include personal property, such as cars and other vehicles, and tangible assets, like stocks and bonds.
Inventory: Most lenders like to see small business owners have enough inventory on hand to meet short-term customer demands.
Biggest Mistake: Not having a strategy for growth can be the biggest mistake you can make when looking for funding. Also, have up-to-date financial statements for your company ready to show a lender. This will help the lender get an idea of your current status concerning liabilities and capital structure.
When you have some equity, it can sometimes be easier to qualify for a secured line of credit than an unsecured one. Secured loans are the best if you do not have an established credit history. Before applying for a secured loan, make sure you can afford to pay monthly interest and that the loan will help your business, not hinder it.
Once you have created your business plan and acquired pertinent information about your company’s financial condition, you must determine your line of credit needs. First, consider how much additional money you will need to fund growth. Second, what is the highest amount of cash flow that can be generated from current operations? Next, determine the minimum level of working capital that must be maintained to operate the business effectively.
Applying for Your Small Business Unsecured Line of Credit
If you own a small business, chances are you’ve been considering applying for your funding application. It will provide the much-needed cash flow to keep your enterprise going and growing — and that’s just one of the many benefits it has to offer.
After filling out the one-minute application, a loan officer will be in touch with you and arrange to meet at a convenient location. That’s it! The line of credit is available within 24 hours and you’ll receive a loan check in the mail within seven business days.
To use the small business unsecured line of credit, though, you’ll need to establish that you’re a qualifying borrower. This means lenders will want to see your financial statements or personal tax returns or even your profits and losses statement.
Evaluating Valuable Assets
Business assets, including a loan-related asset, may be used to determine the extent of the line of credit. If your line of credit is based on a fraction — for example, 72/100 — it means that you’ll only receive interest equal to 72.5% of the amount borrowed.
The small business unsecured line of credit is available in amounts up to $500,000 with an interest rate at the federally determined prime rate (the same rate as commercial banks charge their best customers).
Shorter repayment terms are generally available with a small business unsecured line of credit than with a typical small business loan or another type of business line of credit. That can help your cash flow. You will also have flexibility in the amount you can borrow and for how long. For example, you may need to borrow $60,000 for three months, or $150,000 for a year. It’s based on your needs. Typical rates start at 1% and go down based on your account history and payment behavior over time.
You’ll also have to create an initial positive cash flow within the first three months following approval of the small business unsecured financing.
Financial Review After Twelve Months
An annual review is required. You may even get the option for a lower interest rate during this period if your cash flow improves and you can demonstrate that you’re responsible with your payments and you won’t be late in any of the past three years.
Many small business unsecured lines of credit loans are structured so they can be paid off in full at any time without penalty. Many lenders allow you to pay off that debt early at any time after the first year.
FAQs for Small Business Unsecured Line of Credit
What Can You Do with an Unsecured Business Line of Credit?
They’re an excellent way to finance the purchases of capital items such as equipment, inventory, and other costly investments.
Lines of credit also provide a potential cash flow through billings for customers or clients with open receivables.
Lines of credit can be used to purchase commercial property such as land or buildings.
They can be used when you need extra working capital for day-to-day operations or emergencies.
The best part? If you’re not ready to pull the trigger on a full-blown loan yet, lines of credit are interest-free until fully drawn!
What Happens If I Don’t Pay My Small Business Unsecured Line Of Credit?
If you don’t make your payments on time, your line of credit account will be classified as past due and the bank may charge a late fee. You’ll also have to pay interest at a higher rate until the balance is paid off. This means that you will be charged more for the money that’s in your account, compared to if you had taken out a loan and paid it off within a reasonable amount of time.
If you fail to pay your small business unsecured line of credit, the bank can try to take money out of your account through an automatic payment deduction. If you don’t have enough cash in the account, they may take it out in the form of a negative balance or a debt collection letter. The bank might also seize property by taking money from your business bank account.
If you have several loan accounts with the same bank (including other lines of credit), they can add up all the past-due accounts and ask for a lump sum payment. They may also choose to seize your property after they’ve exhausted all other attempts to get their money.
How Are Cash Flow Experts Able To Help With Business Credit Building?
A cash flow business credit expert should help you calculate your cash flow and determine what is the maximum cash flow their company is willing to offer for you. Bottom line, a cash flow specialist establishes long-term relationships and will help you secure a business unsecured line of credit from your alternative financing solutions that suit your cash flow needs.
A business unsecured line of credit is a capital bank loan that requires no collateral. It’s a temporary, short-term solution to an immediate liquidity need that doesn’t require lengthy or complicated paperwork for verification.
Is It Hard To Get a Small Business Unsecured Line of Credit?
Business Unsecured Line of Credit business has a relatively simple process. The business owner, business broker, or business lender will determine the flexible term lengths and credit line that is necessary for the business to be successful and profitable. The unsecured line of credit is not based on collateral (business property) and instead is based on the income potential for the business.
Business Unsecured Line of Credit-lending institutions may be authorized by federal law to extend credit up to $5M if they meet regulatory requirements and are registered with state agencies that regulate their extension of credit.
What Are the Repayment Periods for Small Business Unsecured Line of Credit?
You can apply for a small business unsecured line of credit up to $5M and repay it over 3, 5, or 7 years. Take advantage of payment flexibility and choose the repayment payment schedules that are right for you.
Many business owners like to have payment flexibility.
When you don’t need your funds all at once, a small business unsecured line of credit may be the right choice for you.
Even if you think that you will only use part of the line of credit amount now, you can borrow up to $5M and repay it over 3, 5, or 7 years. You decide how much money you want to borrow at any time during the life of your line of credit based on your payment needs.
With a small business unsecured line of credit, there are no limits on the number of payments or when they must be made during the life of your line of credit.
What Is the Interest Rate for Small Business Unsecured Line of Credit?
The interest rate is primarily the rate of interest charged to a borrower for borrowing money. Many lenders offer low- or no-interest rates on their unsecured small business loans as an incentive for business owners to borrow.
Lenders set their own rates of interest, and interest rates can vary widely depending on the borrower’s creditworthiness. Unsecured business credit cards, including unsecured business lines of credit, have variable interest rates. The rate might be higher for new customers than it is for existing customers to compensate for the additional risk.
Interest is usually charged on an annual basis and is paid at the end of each year until the balance is paid off. Terms vary with each lender but typically range from 3 to 7 years.
Businesses that obtain a line of credit can draw down money as needed and pay back only what they borrow plus the interest on their outstanding balance.
Can I Use a Small Business Unsecured Line of Credit for Any Purpose?
While you can apply for business credit lines, it’s best to only use them for certain purposes. A business line of credit serves as financing and is often used to fund inventory, receivables, and other working capital. Consider using another type of loan to cover personal ongoing expenses or debt consolidation.
How to Pay Back a Line of Credit?
If you have an unsecured business line of credit, you’ll pay interest each month on the unpaid balance. If you fail to pay your monthly obligations, you may be charged for the interest as well as fees at the expiration of the term. You will need to make payments on time to avoid being charged extra fees.
What Are the Eligibility Requirements for Unsecured Business Credit?
You must be the owner or partner in charge of a US-based company that will serve as a borrower. The entity must have been incorporated for at least 1 year and cannot have been declared bankrupt within the last 5 years. Please note that you will need a social security number for each borrower if they are individuals.
Get More Information and Apply Online
The review process is completed in the same way as above, with one exception: the income must be related to the business. You will need to provide 2 years of tax returns and financial statements that show cash-flow. If the lender considers you an “emerging business”, your monthly revenue must exceed $15,000.
If your loan application is approved, funds can be received in 1 business day after your funding request has been accepted! For more information about unsecured business loans, please contact us at (888) 653-0124 or online.
Takeaway: An unsecured line of credit is a great way to get unsecured business funding for your small business. If you are looking to expand your business or need money for your small business, an unsecured line of credit might be the best way for you to get a loan.
- Hard Money Lenders For Business - March 24, 2023
- Business Line Of Credit With EIN - March 24, 2023
- Mezzanine Loan Real Estate - March 24, 2023