Obtaining Unsecured Business Credit Lines
In order to supplement the operations of their businesses
, numerous business owners are turning to borrowing in order to keep things running smoothly. For those who can meet certain criteria, unsecured business credit is indeed available.
An unsecured line of business credit is a loan provided by major lenders, and is given to the borrower in the absence of security or collateral for the loan. Such a loan product is a helpful tool for business operators who do not wish to jeopardize their personal credit or assets should the business fail; this differs from a typical secured loan situation in which the creditor requires collateral, or security in the form of some type of asset valued comparably to the loan amount.
Lenders see this type of loan as being riskier than other types of products, as the borrower has pledged to security or collateral in case they are unable to repay the obligation, and this is the reason that it is quite difficult to obtain this type of credit. The following are a few strategies to help increase your chances of securing unsecured business credit.
Declare Your Business Enterprise
Initially, it is important to formally put your business entity into place. The business enterprise needs to have formal registration as a corporation or limited liability corporation and have functioned successfully for no less than 2 years. Lenders like to see a history of at least two years of successful operation due to the danger of bankruptcy faced by brand-new small businesses.
Further, it will be necessary for the business to have a true street address, rather than a post office box. Post office box address (not appropriate for business credit applications). The business will also need a land telephone line and dedicated fax number registered in its own name.
You should be prepared to provide all legal documentation for the business. Such documentation encompasses tax filings, contracts, permits, licenses and financial statements.
Certain lenders may require you to submit personal data including photo identification, bank account information, tax filings and personal income documentation. It is important to be able to produce such information quickly, should the lender require it.
Be Sure Your Business is Recognized by Relevant Agencies
In order to apply for a business loan, your enterprise must have its own recognized credit history. Several agencies offer this type of service, with Dun and Bradstreet being one. Your business must also be recognized by credit reporting agencies, as they are able to report to potential lenders on the credit history of the enterprise once you begin to seek an unsecured business loan.
Submitting Your Request
In addition to meeting the aforementioned criteria, your business needs to have a sound justification for seeking unsecured credit. It is important that you are able to articulate the reason for the loan, how much money is needed, and the ways in which it will be used. These steps are critical in firming up your business credit rating. The bottom line is that the lending entity is placing a substantial amount of trust in your business, and fully anticipates that you will use the loan proceeds appropriately and will repay the obligation in a timely manner.
by: John Purfield
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