The big banks have become more active in small business lending in the years following the 2008 financial crisis, but to this day only the most creditworthy businesses are considered, and most banks require collateral to secure the loan.
Such lending requirements create challenges for smaller businesses with few assets, and for business owners who are wary of risking their personal assets. A number of internet-based non-bank lending sources have emerged to provide small businesses with access to financing without the need for collateral.
Check your cash flow to make sure you can repay the loan.
Clean up your credit report before you apply for a loan.
Create a solid business plan to show the lender.
Research lenders in advance to compare rates, fees, and qualifications.
Today, almost any business, regardless of its stage or size, has access to unsecured financing through a number of alternative lending sources, most of them operating online only.
Expect to Pay
Be warned, they do charge higher interest rates than traditional banks. In most cases, you can qualify for financing based on your credit history and a record of generating a certain amount of revenue.
Obtaining an unsecured loan through a non-bank lender may be less onerous than the process needed to apply for a traditional bank loan, but there are still some essential steps. Below, we narrowed it down to four.
Check Your Cash Flow
Unless you have a high credit score and a strong record of revenue generation, you are likely to be saddled with a high-interest rate on an unsecured loan. The annual percentage rate (APR) can range from 10% for the most creditworthy borrowers to triple digits, depending on the lender and the type of loan.
Avoid merchant cash advance financing. This type of loan has the highest rates.
Before approaching a lender, assess your cash flow projections to ensure you have sufficient funds to repay a loan. Failing to repay the loan will damage your credit score, making it more difficult to obtain any type of financing in the future.