As a small business financing consultant I speak to people all the time who believe that unsecured business lines of credit are an elusive type of financing. I’ve even had someone tell me that trying to obtain an unsecured business line of credit is “like chasing unicorns and dragons, people say they exist but I’ve never seen it.” The fact of the matter is, unsecured business lines of credit are not an elusive type of small business financing. You just need to know two things — how to qualify for them and where to go to obtain them.
How to Qualify for Them
With any type of financing you will need to meet certain qualifications to be approved. To obtain an unsecured business line of credit, you will most definitely need to have good credit. Since the financing is unsecured (meaning you don’t need to pledge collateral to get approved), lenders require you to provide a personal guarantee. Providing a personal guarantee means you’ll have use your personal credit history as “collateral” to get approved.
The process of obtaining an unsecured business line of credit can be fairly quick and simple. The hard part (for some people) is meeting the requirements to get approved for them. You must have an established credit history (preferably at least 5 years old), with no derogatory or delinquent accounts. This means your credit report should be free of late payments, defaults, collections, public records, etc. Anything negative on your credit report will hinder your ability to qualify for an unsecured business line of credit.
You can prepare yourself to meet the requirements for approval by properly building and maintaining credit. The key is to obtain diverse accounts (i.e. installment loans or personal credit cards) and using them (sparingly) and pay them off on time. If you can do this consistently for at least a period of 5 years, you will increase your chances of being able to qualify for an unsecured business line of credit.
Where to Go to Obtain Them
In my professional (and expert) opinion, it’s best to consult with someone who is well-versed in unsecured business lending if you plan on applying for an unsecured business line of credit. Small business loan brokers are your best bet at connecting with unsecured business line of credit lending sources that are suitable for you. The best small business loan brokers will be able to analyze your personal credit history to determine which unsecured business line of credit lender to approach. Everyone’s situation is unique and different so one lender may work for you while another may not. This is one of the most important reasons why it would be wise to seek the help of a small business loan broker to help you obtain an unsecured business line of credit. They can direct you to the right lender which can help increase your chances of getting approved.
Sidenote: Why not seek the help of the experts at LenCred? They are some of the best small business financing experts in the industry and their expertise in unsecured business lending is unmatched!