Unsecured
small business
loans are monetary loans that do not require collateral or guarantee.
In other
words, they are not secured against the borrower's assets.
Benefits
The benefit
of small business loans lies in the fact that if the borrower
defaults on
the
loan, then his or her personal possessions like his or her house or his
or her
property will not be seized to repay the loan.
Who are the
people who
require, and are approved for, unsecured business loans?
These type of loans are
usually required by small business owners
and owners of
start-ups in order to
establish or expand their company.
Unfortunately,
such individuals are not
treated favorably by banks and other financial institutions because
they do not
have prior business experience or credit.
Banks and other
financial institutions find it very easy to turn them
away.
In order to
assure such
individuals of the required cash flow, the SBA acts as a guarantor to
offer
them unsecured small business loans.
Uses
of unsecured
loans:
These small
business loans can be used for
almost anything related to the establishment and the development of a
business,
including the purchase of equipment, remodeling, office expansion, or
marketing. But there is greater risk for the funders.
With
a small business loan that has no collateral, the business-owner will obtain access
to a
line
of credit that can be utilized whenever the need arises for
additional
financing.
The interest
rates
applicable to the unsecured small business loan may vary with each
individual
lender and borrower.
Another
benefit of the collateral-free small business loan is that the business owner
is only
charged interest on the money he or she borrows from the approved line
of
credit.
The
financial lenders
associated with SBA
are currently approving unsecured small business loans for
small business-owners under the Community
Express Loan Program.
The features of the Community Express Loan Program are summarized as:
- Lenders of anywhere from $5,000 and $50,000
- very
little paperwork
- applications
dealt with in two days
- interest
rates averaging around 7.75%,
- if
approved, funds wired directly to your business account within 2 weeks.
Disadvantages
The major
disadvantage of
this program is that the number of loans that can be granted are
limited because
the U.S.
Congress has capped the number of approved loans at 10%.
Obama’s
stimulus bill,
however, has added to the efficacy of the program by allowing the SBA
to
guarantee up to 90% of the loans made by private lenders under their
program.
Generally
speaking, small biz loans that are unsecured are more difficult to
obtain.
Banks and
other financial institutions will want to ensure that the business
owner is
capable of repaying the loan.
With that aim
in mind, they will look for
positive business credit history.
Of course it
will only increase the chances of approval
for the loan, if your personal credit score, as the business owner, is
an above average credit score.
Secure
an expert business
coach from our directory of coaches to learn how to establish and
improve your
business credit scores by separating your personal credit from your
business
credit.
Your personal executive coach will show you how, by
taking out small lines of credit and other bank loans that report to
the Small
Business Financial Exchange you will be well on your way towards
establishing
the kind of business credit score that will impress a potential lender.
From
Unsecured
Small Business Loans to
Gov. Small
Biz Loans
