It is not exaggerating the things if we say that secured loans are in general a bad idea. Being less risky for the lender, they tend to attract very competitive interest rates. Although, all you need to balance this saving with your increased risk, specifically if it’s personal rather than business collateral that is being used. This article will help you to know the different ways of the Business Loan without Collateral. Following are the alternatives:
- Merchant cash advance: This kind of form for finance allows you to borrow an agreed sum and repay it via a fixed percentage of your credit card sales. The main benefit is that the repayments are geared to turnover, meaning you will be hit with a repayment that you can’t meet. On the contrary, this traditionally a very expensive way to borrow.
- Equity finance: When you get involved in business angels, you can go for equity trade cash, and potentially get an influential new business partner. Moreover, as this may seem attractive, it means diluting your equity stake in the longer term and could prove hugely expensive if the business becomes a runaway success.
- Crowdfunding: This is one of the fast-growing methods of finance that enables you to bring public and private investors together to fund your business. For the success, you will definitely need a strong brand or a specific visible product, ideally in the high technology sector.
- Peer-to-peer lending: The alternative lending platforms allow the individuals to lend to businesses based on their business plan. The loan term and interest rate shall usually be dictated by the company’s creditworthiness.
Four ways of Business Loan without Collateral
You can also avoid the above-described methods and take out a traditional loan from a bank or other lender, then there are certain ways to improve your chances of business loan and without offering a personal guarantee.
- Take out an unsecured loan: It is entirely obvious that your business will qualify for an unsecured loan, making the issue of collateral irrelevant. The ability to show consistent profits will significantly increase your chances to take out an unsecured loan.
- Research the market carefully: If your first unsecured loan reveals to be thin on the ground then have a look again, they are out there. The additional peace of mind could well be worthful if you will look at the much shorter terms as well as much higher interest rates.
- Improve your credit score: This is the key to everything. Less the collateral, the more important your credit score will become. In the case of compromise, try to pay off as much debt as you can, reduce your credit card balances and strive to pay your suppliers back on time.
- Draft a great business plan: When your company is in progress to date is relatively unexciting, then you can tip the balance with a thrilling business plan.
The aims and objectives should be clearly set out from the above points, must emphasize your unique market position and most importantly set out the clear and costed plan for growth.
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