Get an Unsecured Small Business Loan By Making Lenders Like You

Securing an unsecured small business loan is popular amongst borrowers but not so much among lenders. But if you know the rules, you can change the nature of the game and get lenders on your side.

Popular books and so called financial guru’s today often encourage small and new businesses to fund their business endeavors with their own personal assets. These assets include savings accounts, equity in their homes, stocks and securities, retirement accounts like their IRA’s, and 401K’s.

But let’s be real. When you built up your savings account you did so to support your family in times of need. If you take that money to finance your business, what will you do when truly hard times hit?

Did you think for a minute, “I’m not at risk form for being hit with hard financial times. My business is going to generate too much income for that!”

Don't be fooled. Remember that over 90% of businesses fail within the first five years. It's possible that you might be included in this group.

I'm not suggesting that you’ll definitely end up there of course. I'm just encouraging you to recognize that it's a possibility. Believe me when I tell you that lenders see you and your business this way until you’ve given them good reason to do otherwise.

Truth be told, in these times of economic instability it's just foolish to assume that hard times will never come.

So instead of using the family’s money, consider starting a savings account strictly for your business. This is important because lenders expect your dollars to be invested into your business before they ever invest their funds.

It’s also a step that will help you build your business credit and get lenders desiring to shake your hand.

But you still need more money to grow and expand your business right?

An unsecured small business loan may be the answer to your prayers.

The good news is that you can get lenders to lend you money and do what many business owners only dream of.

You can get then standing in line waiting to extend you credit and hoping you’ll pick them as your lender of choice!

But how? What’s the secret? I'll answer this question by answering a series of questions posed by business owners everyday.

Your Questions

What is a personal guarantee? Do I have to sign one to qualify for an unsecured small business loan?

How many unsecured small business loans can I get?

Why did I get turned down?

What’s the most I can qualify for? How can I increase this to a more significant amount?

How can I get lenders to stand in line hoping that I will pick them as my lender of choice?

Real Answers

What is a personal guarantee? Do I have to sign one to qualify for an unsecured small business loan?

A personal guarantee is basically a promise to repay an unsecured small business loan personally even if your business can no longer do so.

Yes, even though it’s an UNSECURED small business loan the lender can still go after your personal assets to recoup their funds if the business defaults on the loan.

If you’re applying for a traditional unsecured loan at the bank you will most likely have to sign a personal guarantee.

In rare cases, they will allow the personal guarantee to be waived. To determine if they’ll allow you to get an unsecured small business loans without a personal guarantee, talk to your local banker.

In order to qualify though you’ll likely have to have extremely good business income, personal credit, and company stability. Stability meaning the business has been producing positive income for two or more years.

Pretty strict right?

So then, instead of crossing your fingers in blind faith make lenders want to give you one. How?

The very best way to get them standing in line willing and ready to give you unsecured small business loans and lines of credit without a personal guarantee is simple.

Build your business credit!

“That’s it?” You might ask. Yup! That’s it. Simple.

When the answer to a seemingly complicated question is that simple some people tend to look for an answer that’s more complicated. They want to jump though a whole bunch of hoops.

But sometimes simple is better. Here’s the bottom line - when you have strong business credit lenders feel much more comfortable with the risk.

They're willing to put their money where their mouth is and lend you money without any collateral or personal guarantees!

How many unsecured small business loans can I get?

You can get more than one loan but it’s not wise to apply for too many at the same time.

In an effort to secure more dollars, some have been known to apply for multiple different loans to multiple different lenders.

I’m not talking about shopping for the best rate. I’m referring to shopping for multiple loans. For example, a borrower may need $100,000, only get approved for $30,000 and continue to apply for multiple loans to get the other $70,000.

It only creates more problems. It may even prevent your from getting the amount that you would’ve qualified for. Why?

Multiple reasons:

1st - Your credit will be pulled by each lender that you apply with. Each time a lender pulls your credit, it shows up as an inquiry on your credit report. Too many of these inquiries can send your credit plummeting down from the high 700’s to the low 500’s. Ouch!

2nd - When the lenders check your credit they will see that they’re competitors have inquired about your credit.

This is a tell tell sign that you’re shopping all over town for multiple loans. If you shop it to too many lenders, it can be like an insult to them all.

When borrowers apply for multiple unsecured small business loans this way they’re either honest on the application and effectively say:

“Yes I am applying for other unsecured small business loans at your competitors’ offices. I have no loyalty to you and since you’re going to find out anyway I may as well tell you the truth.”

Or they feel a burning desire to be untruthful and effectively say:

“No, of course you’re the only lender I want to be with. I love you with all of my heart and I would never cheat on you.”

I don’t care which way you answer this question if you’re applying for multiple loans you put yourself in a bind. Like your significant other, lenders want to know that they’re the only one.

To make lenders like you, you have to be “faithful.”

3rd - The loan application itself is full of legal language that can incriminate you. For example, it requires that you provide truthful information AND by signing you promise not become further indebted.

Lenders are so interested in making sure you’re being “honest” and “faithful” in the relationship that if you do get a loan and they find that the statements you made on you application were false, you become guilty of committing a felony level fraud!

Uhh Ohhhhh…

Also, if you violate the agreement by later getting deeper into debt, the entire amount of the first debt becomes immediately due and payable. While it’s probable that they won’t enforce this rule, they could if they wanted to because that is how the loan contract is written.

Of course you can apply for multiple business credit cards, but these are limiting as they’re generally tied to your personal credit and income.

“But if the best way is to only apply at one bank that I’m already in a relationship with, how can I maximize my borrowing power?”

Good question. Keep Reading…

Why did I get turned down?

The number one reason business owners get turned down for an unsecured business loan is due to poor credit.

“How can I ensure that I get approved? And get the highest possible amount?”

You guessed it!

Build your personal credit.

“But how do I do that?” Here are a few suggestions:

  • Make a commitment NOW to start paying all of your bills on time.
  • If you can’t afford to, contact your creditors (if appropriate) and work out payment arrangements that will work for you both.
  • If you feel you don’t want to or don’t have the skills to do it yourself, hire a reputable Debt Settlement company to do it for you.
  • Hire a reputable Credit Restoration company to make appropriate disputes in your behalf or do it yourself. I highly recommend that you hire professionals if you have negatives on your credit such as bankruptcy, collections, judgments, and liens.
  • Maintain a 10-30% debt to credit ratio.

Another primary reason business owners get turned down is due to poor business income stability.

More than how long you’ve been in business this really is about how long you’ve been earning income and how much of it you’ve earned. For more detailed information on how your net income effects how much you qualify for, keep reading.

By the way, if your partner with the right company when building your business credit, you’ll benefit from the built in mechanisms to help you build your personal credit and income stability.

What’s the most I can qualify for? How can I increase this to a more significant amount?

I can’t give you an exact number, but here's the main underwriting guideline you need to remember.

Their goal is to lend 25% of your annual net income or less. What does that mean?

Let's say your annual net income is $100,000 dollars a year. If you walk into a bank and apply for a $300,000 unsecured small business loan, you will not qualify for more than $25,000.

Buy I need $300,000 you plea in defense! Why in the world would you even insult me with that low amount? It’s simply because these loans are unsecured!

Give the banks some collateral to secure the loan with and you may find that they may dramatically increase the dollar amount that you qualify for.

"Hold the phone. Earlier you suggested that I avoid securing loans with my personal assets. Now you want me to offer lenders collateral? Which is it?"

Although it may sound like I’m contradicting myself? I’m not.

Instead, I’m encouraging you to give them the right type of security. An example of the right type is cash itself.

Remember that I encouraged you to start building a business savings account. The funds in this account can be used as security to potentially increase the amount of credit you qualify for!

Another way to increase the amount you qualify for is to do what I've encouraged you to do before. What's that?

You guessed right: Build your business credit! This will allow you to leverage your business income even more. While decreasing use of limited personal income and credit.

How can I get lenders to stand in line hoping that I will pick them as my lender of choice?

Now that you understand that too woo lenders you should:

  • Build Your Business Credit

  • Build Your Business Income Stability

  • Build Your Personal Credit and

  • Offer the Right Type of Collateral

Here’s the final most effective way:

  • Partner With the Right Professionals

Partner With a Broker.

Did you know that when you hire a broker, they’re the only company that has to pull your credit report? They can assist you in maximizing your borrowing power…

And here’s the kicker – Borrowers and lenders EXPECT brokers to shop your loan for the highest possible amount. In other words, if a broker sends your package to a few appropriate lenders for a quote, it’s not considered and “unfaithful” act on your part!

In essence, they are like a cure-all for many of the lending maladies you could find yourself in.

Partner with a Business Credit Builder.

The right one will not stop at building your business credit.

They’ll have relationships with lenders that already enjoy lending to their clients.

Also they’ll ensure you can qualify for unsecured small business loans without a personal guarantee.

Partner with a Credit Repair Company

Even if you have relatively good credit, partnering with a credit repair company is a wise choice. Instead of poor or mediocre credit you can be in the 700’s with 6 months.

Partner with a Debt Solutions Company

If you’re having difficulty paying your bills on time, they can help you negotiate terms that will work for both you and your creditors.

Partner with Your Attorney

If your debt obligations are completely overwhelming, you may qualify for a bankruptcy or other form of relief. Your attorney can give you appropriate direction.

In conclusion, an unsecured small business loan is more than attainable. You may have to give something to get something, but isn’t that how it works when building any relationship?

Yes getting lenders on your side is simple when you understand the concepts presented above.

More question about an unsecured small business loan that was not addressed here?

Tell us what you want to know at the Business Loan Express Contact Us page.

We'’ll continue to provide real answers to your questions.

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