Options for Securing a Small Business Loan Even If You Don't Have Collateral
Fri, 11/09/2012 - 4:26pm | by Guest Contributor
Small businesses are what make our country work. But if you're a small business owner, times are tough. Consumer spending is down, and cost of living continues to rise. Sometimes the difference between closing your doors and a long, productive life for your company is simply whether or not you can secure a small business loan. But chances are if you're in the position of needing a loan, you probably don't have a lot to offer in return. You may not have any collateral at all. Rest assured that there are still options available. If your business is viable and you're committed to doing whatever it takes, here are a few ways you can nail down a small business loan even if you don't have collateral.
Your first job is to check your credit. Good credit may end up making the difference in this endeavor. There are many options for unsecured business loans if you have a strong credit rating. You can get a copy of your credit report from each of the three major credit agencies for free once each year. But you can also hit the web and get your credit score for a quick picture of your credit worthiness. Check out freecreditreport.com, a great resource for all the information you're going to need before requesting a loan. If you find out there are negative reports or bad marks on your credit, make sure they are accurate. You can dispute anything you think is a mistake and get it scratched from your record before it can come back to hurt you.
The next step is to hunt out options for unsecured loans. Lenders who offer unsecured loans won't ask for collateral in return. Many of them won't even check your credit rating. More often than not, you won't have to look far to find companies that offer unsecured loans. If your business has been registered for a while, chances are you get mailings about these sorts of loans all the time.
Another interesting option is person to person lending. In these cases, wealthy individuals simply look for opportunities to offer financing. These lenders are not looking to create a long term relationship with a business; they're simply trying to make a profit. They'll often allow you an extended repayment period as well. Prosper.com is a great resource for finding the companies that can connect you with these types of lenders, if you need a place to start.
If you've drawn a blank to this point, it's time to consider approaching family and friends. It may be difficult to keep a lender/lendee relationship neat and clean when it's someone you're close with, but it may be worth it. If you truly believe in your business, you'll be able to pay them back, and they will reap the benefits of your success. Offer the lender terms that are more favorable than those of a typical bank loan, to give them faith in the arrangement.
Last but not least, you can turn to credit cards. If you checked your credit and all is good, you can probably apply for a credit card with a high limit and a fairly low interest rate. Some credit card companies even offer lines of credit to consistent customers. The great thing about this situation is that you only accrue interest on the money that you need to use each month, as opposed to on the entire amount, like with logbook loans UK. Pay off as much of the debt as you can, and pay it off completely once your business turns around.