Knowing how to qualify for an unsecured business loan before you apply will give you time to properly prepare yourself to get approved. An unsecured business loan can be fairly easy to obtain if you meet the lender’s requirements for approval. Qualifying for an unsecured business loan is primarily based on your personal credit history. Lenders use your personal credit history to determine if you are creditworthy to borrow unsecured capital. You’ll have to provide the lender with a personal guarantee that you will pay back the unsecured business loan.
A personal guarantee is needed since you are not required to pledge collateral to qualify for the unsecured business loan. If your personal credit is currently damaged, you will need to improve it before applying for an unsecured business loan. Here are several ways you can work on improving your personal credit to qualify for an unsecured business loan–
- Review all derogatory and delinquent accounts – Review the derogatory and/or delinquent accounts that are affecting your personal credit so you’ll have a good understanding of what needs to be done to get them removed. Make a list of the accounts and account numbers along with the creditor names and mailing addresses.
- Negotiate account payoffs (and pay for deletes) with creditors – After making a list of all of the negative accounts affecting your personal credit, begin contacting your creditors to negotiate payoffs (if you feel comfortable doing so). I suggest only doing this is you know you have the funds to pay of the accounts negatively affecting your credit. If you don’t, you may want to wait until you do before contacting your creditors.
Furthermore, I suggest requesting a “pay for delete” from your creditors. A pay for delete is when you ask a lender to remove a derogatory account if you pay it off. Not only should you request this over the phone, you should also put it in writing and send it to your creditors by certified mail. If they agree, have them send you a letter in writing (by certified mail), complying with your request. This may or may not work but it’s worth giving it a shot.
- Send out dispute letters for accounts that you don’t recognize to be accurate – Another option (besides contacting your creditors to pay off negative accounts), is to send out dispute letters to the credit bureaus. If you don’t recognize any of the negative accounts (or feel that they are inaccurate), dispute letters will help you get them removed from your credit reports. If credit bureaus find that they are inaccurate or don’t belong to you during their investigation, they will remove them from your credit reports.