Introduction: Unsecured Business Loans and Unsecured Line of Credit for All Types of Credit Scores
Starting a business with bad credit can be like trying to run a marathon in flip-flops. When it comes to getting unsecured business loans for a startup business, your credit score with follow you around like your shadow.
Those unpaid credit card bills from college may very well come back to haunt you, even if you have a great idea for a potentially profitable business venture.
Fortunately, just as there are people who run marathons barefoot, there are also ways to qualify for an unsecured line of credit even if your credit score dangles below the 500 mark.
There are a number of online lending agencies that are willing to give your business idea the unsecured business funding it needs to get off the ground. And once you find that first unsecured line of credit for bad credit businesses, you may very well be able to drastically improve your credit if your business flourishes.
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In this brief article, Advisory HQ will look at the importance of unsecured loans for bad credit businesses. The best business ideas often only need someone to trust them, and we offer you six ways to find the best unsecured business loans with bad credit.
Starting a business shouldn’t only be a privilege for those with stacks of cash in their savings account. By learning how to find an unsecured business line of credit, you can get your business off the ground.
The Importance of Unsecured Loans for Bad Credit Businesses
Any good business idea needs cash up front to get started. Most big banks simply won’t entrust you with unsecured small business loans if you don’t have good credit standing. When you put those two truths together it can seem almost impossible to get your business idea of the ground.
Trying to start a small business without an unsecured line of credit loan is a recipe for disaster. There are a number of small and hidden costs associated with beginning a business that simply cannot be avoided. According to Business News Daily, “there are various types of expenses to consider when starting your business. It’s important to differentiate these types of costs, in order to properly manage your business’s cash flow for the short and long term.”
You will have to spend a large amount of money to incorporate your business and pay all relevant taxes and fees associated with beginning your own company. Furthermore, chances are that you will also need equipment or machinery to get your business off the ground.
On top of that, you are going to have ongoing costs associated with your business that will take a toll on you during the first months of operation.
Since the first quarter of operation almost always entails a negative cash flow while you are busy building a solid customer base, unsecured startup business loans are often the only way to help you cover those costs and weather the storm until your business begins to prosper.
People with bad credit, however, often get frustrated when banks deny them an unsecured line of credit for bad credit businesses and attempt to begin a business with their savings alone.
The most common failure for startup businesses is not having the necessary cash cushion to help get them through those first months. Finding unsecured business loans with bad credit can help you spread out the expense burden of your startup costs over several months while you get a solid footing in the market.
Top Six Ways to Find Unsecured Business Loans with Bad Credit
If you have hit up pretty much every bank in town asking for unsecured business loans and still haven’t found and unsecured line of credit loan, don’t throw in the towel quite yet. Below you’ll find six ways you can find unsecured business loans with bad credit even if every bank has already turned you down.
- Search for Web-Based Lenders for an Unsecured Credit Line for Your Business
Entrepreneur.com says that “studies show that credit card and bank financing account for just 25 percent of the total funding needs of early-stage entrepreneurs. This statistic should provide you some comfort, because it implies that 75 percent of the money you need can come from other sources that rely less on your credit rating.”
If you have bad credit, chances are that the major banks have already denied you an unsecured line of credit, and your credit cards are probably already maxed out. Luckily, banks and credit cards are only two of the many options for unsecured business financing.
Kabbage.com is one online lender that specializes in unsecured loans for bad credit businesses. You can get access to cash and an unsecured business line of credit quickly and efficiently. What’s more, Kabbage.com has no minimum credit requirement. However, the lower your credit score, the higher annual percentage rate (APR), you’ll end up paying.
While many people may have qualms about taking out an unsecured line of credit for bad credit businesses, Kabbage has been given an A+ rating by the Better Business Bureau, making it a trusted lender for your unsecured business funding needs.
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- Find Lenders with No Minimum Credit Requirement for an Unsecured Business Line of Credit
While there are a number of online lenders that specialize in unsecured small business loans, many of them will have somewhat strict minimum requirements. Furthermore, if your credit score is below 500, you may be accepted for unsecured business financing but end up paying an arm and a leg in interest rates.
Kabbage.com has no minimum credit limit, but their interest rates can skyrocket up to 108% if your credit score isn’t optimal. Another online lender for an unsecured credit line for your business is Fundbox. Though less well-known than Kabbage, their interest rates for unsecured startup business loans range from 13 to 68%. While 68% still seems hefty, it is a lot more manageable than 108%.
- Consider Other Unsecured Small Business Loans if You Have Average or Good Credit
If your credit score is above average, chances are a bank may take a chance on you for an unsecured line of credit. However, you should research other web lenders that can offer you competitive interest rates and other perks on unsecured business loans that may very well be more enticing than what the bank can offer you.
If you have a credit score rating above 600, Street Shares is a fantastic lender that can offer you an annual percentage rate as low as 9% for unsecured business loans. Plus, you will only need to have $25,000 in annual revenue to qualify for an unsecured line of credit. This option is best for young businesses that have already established a name for themselves but need capital to continue growing.
- Have a Plan to Pay Off Your Unsecured Business Funding Within a Limited Time Frame
If you apply for unsecured loans for bad credit businesses, you will need to have a plan to pay off your unsecured business line of credit in a timely manner. Before going all in and purchasing expensive equipment or renting a $4,000 a month locale in the middle of downtown, do your homework on your potential client base.
Many lenders will be more willing to grant you unsecured loans for bad credit businesses if you can show them you have a solid plan for quickly attracting a solid clientele that will help your cash flow move toward the positive column in the beginning months.
Doing a simple market analysis or even sending out anonymous surveys in the neighborhood where you plan to open your business may help you get an idea of your future customers. Even if you have a solid unsecured credit line, trying to open a new pizza shop on a block with a Domino’s, Pizza Hut, and Papa John’s is bound to be a failure.
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- Consider More Than Banks or Credit Card Loans for Unsecured Business Financing
If the banks have turned their back on you and online lenders are only offering you unsecured business loans at an interest rate that you don’t think you can afford, then consider looking for an unsecured line of credit for your business idea in non-orthodox ways.
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If you had a grandparent with an entrepreneurial spirit, chances are that he or she probably didn’t receive an unsecured business loan from a bank. A wealthy distant relative may very well have provided the unsecured business funding they needed to get their business off the ground.
Asking friends and relatives to provide you with an unsecured line of credit for your business idea may seem old fashioned, but it is a great alternative if you can’t find unsecured startup business loans from other, more conventional lenders.
You’ll probably get a better interest rate from your great aunt than from the bank as well.
Furthermore, there are a number of websites online where you can ask for funding from anonymous donors. These “crowdsourcing” websites have gained popularity recently, and many entrepreneurs have used them to find the unsecured business financing they need.
Crowdsourcing websites give wealthy individuals a host of options for their philanthropic intentions, and you never know when your business idea may very well be picked up by an anonymous, wealthy donor.
GoFundMe is a leader in personal fundraising. You can sign up for free, making it a great option for folks who feel that they have a great idea but not a lot of capital.
- Look for Government Grants as an Alternative to an Unsecured Line of Credit Loan
While the promise of free money from the government may seem “too good to be true,” there are a number of grant opportunities for certain businesses. These alternatives to unsecured business loans are every small business owner’s dream, but you will have to spend a lot of time wandering through the internet to find these alternatives to unsecured loans for bad credit businesses.
If your startup business idea is healthcare related, in the technology sector, or to be located in low-income areas, you may have a better chance of qualifying for a government grant. While finding an unsecured line of credit many be difficult, coming across free government money in the form of grants will require patience on your end.
How Unsecured Loans for Bad Credit Businesses Can Help Your Company Take Off
Finding an unsecured line of credit loan is the first step in any business venture. Before you start searching for a locale or post an ad on Craigslist looking for ideal employees, you will need to make sure that you can get an unsecure line of credit that will allow your business to flourish.
By following these six tips to finding unsecured business loans, you can be sure that your business idea will find the funding it needs. Unsecured loans for bad credit businesses have allowed thousands of businesses to find success and help strengthen local economies.
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