The Unsecured Business Loan Funding Option
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One of the problems of starting a business is that you can never get enough funding. Even if you’ve drafted a business plan showing what you’re going to sell, have you put in a funding plan as part of your startup strategy? Everyone assumes that they’re going to get an SBA loan or some other kind of bank financing. But what happens when you don’t get that? Don’t let unrealistic expectations about funding stop your business before it begins. There’s many more options out there if you know where to look. Starting with an unsecured loan is is probably one of the most widely available funding options out there for a new startup small business.
The Unsecured Funding Option: Apply For Loan, Then Apply Loan
You can start using your unsecured business loan towards growing your business after getting your approval. Unsecured funding is going to be an option for you if your credit is at least decent. It’s a good thing that your credit doesn’t need to be great to get an unsecured loan since most startups don’t have much of a credit history. If you have good enough credit and you can meet the minimum criteria for a loan, then you can qualify for an unsecured line of working capital. Unsecured business loans is not an industry specific source of funding. Every kind of business can qualify with minimally good credit.
Let’s look at a few benefits of an unsecured business loan.
- One of the best aspects of an unsecured loan is that you don’t need to put up collateral. It’s one of the lowest risk financing options when done the right way. You’re not risking essential personal items like your car or your home. The only thing you’re really risking with an unsecured loan is your credit score.
- Unsecured loans require very low payments, which keeps it cashflow-friendly for a business that is just starting out.
- Unsecured lines of credit come in a variety of forms. One form of unsecured business credit is the unsecured business credit card. These unsecured cards can be a great source of funding for a startup business.
Unsecured Loans Can Be Combined With Other Funding Sources
Unsecured financing can be combined with almost any other kind of financing when you’re just starting out. Some optional forms of business financing that combine well with unsecured loans include:
- Peer to peer loans are a form of micro lending that has recently become very popular. Peer to peer loans even outnumber the amount of SBA loans being originated. As their name suggests, peer to peer loans are those loans made to you by your peers. You’ll need to have decent credit and convince someone that what you’re doing is worth loaning you money.
- Another non-traditional option for business funding is going through your friends and family. Friends and family will often be the first to offer to loan you money. They can be especially sympathetic when they hear that you’re trying to get your business started. But some people prefer not to tap their families and their friends for startup funding. The big risk here is ruining relationships that took a lifetime to develop. Having outstanding debts to your family or friends can begin to sour relationships. And many people don’t want to risk that ever happening.
- Your personal savings account is another option for funding a business. Tapping your personal savings is a way to use your own money without having to worry about taking a hit on your credit score. When you dip into your personal savings, you’re getting a funding stream that doesn’t require you to have to make monthly payments. If you’ve got a large personal savings account, you can really get the ball rolling on your business with a good injection of initial capital. This will help get your business started on the right footing and allow you to grow it at a speed that makes sense.
All of the above funding options above work much better when they’re combined with another source of funding. And the best secondary source of funding for most businesses is going to be unsecured loans. Lots of business owners that have started their business will eventually start looking for additional capital. If those business owners only have one source of funding to turn to, then business dries up once that initial source runs out. It’s not the best idea to start a business with only one source of business funding. It’s amazing how quick the money goes when you’re starting a business. You’re going to have to pay to market your business and get your name out there. Lack of marketing remains one of the top reasons that businesses fail. You might decide that you need a little more space or you need to update your computers or phone system. These upgrades are the cost of growing, and they’ll end up setting you back a lot of money when you’re getting started.
The unsecured funding options are going to be a great option for most small businesses. An awesome feature of unsecured loans is that most of them involve revolving credit lines. With a revolving line of credit, you don’t pay anything if you’re not using them. These unsecured lines of credit are just sitting there waiting for you to use them.
An important thing to remember is that lending trends are constantly changing. The only real constant in the miami lend business is that lending trends change. You have to stay flexible when you’re funding a new startup business. It’s going to be important to stay as diverse as you can and get at least one or two of these funding options in place during your capitalization phase.
Securing funding helps you continue to build your capital for the future. It’s crucial for a business to not run out of capital. Without capital, your avenues to growth are severely choked off. If you’d like to find out how Gokapital can help your business reach its financing goals, register here for more information.