Tips in Obtaining an Unsecured Business Line of Credit
Posted by Writer on Dec 26, 2008 in Entrepreneurs • No commentsIn most cases, lenders want business owners to guarantee the loan and offer a secured line of credit. On the other hand if the business owner does not want to risk their personal property for their business, you should consider applying for unsecured line of credit. However, it would be good to caution owners that unsecured business lines of credit do not get approved easily, if at all. In order to improve their chances, business owners need to implement several strategies.
First, you’ll need to allow for a period of time for your business to accumulate a decent business credit score history. Banks and lenders would require you have done business for 2 years or so, of course they want to see a clean business credit record.
Next, retain the services of a reputable credit agency that will keep track of your credit transactions and will provide business credit score report. . If you plan to apply for loans for a lot of money, another thing to look into is Paydex® registration for your business. The system evaulates your businesses promptness of payments and then provides a score. In order to increase your chances of getting unsecured business line of credit, your company need to get as close to the 100 score as possible
Then you would need to have your business properly established with the state you do business in. It would behoove you as a business owner to have your business listed as an LLC or corporation, as sole proprietorship virtually has zero chances of getting unsecured business lines of credit.
While you are still building up your business credit score, ensure a proper physical address for your company and procure a separate telephone line, fax number, and internet connection. It is also necessary to sign up for services under your corporation name, so you can start establishing business credibility.
When it’s time for you to approach lenders and present a loan proposal, have a coherent documentation on the purpose and amount of unsecured line of credit you wish to ask. Include references from banks and trade partners in order to lend added integrity to your application. Don't forget to include proof of your company’s financial status in order to assure lenders your business is serious in establishing this type of credit.
Lastly, keep in mind that unsecured lines of credit carry higher interest rates as wells as stringent payment terms. Before closing the loan agreement, scrutinize first if your company will be able to meet these terms all the way. Don't get into something your business can't handle. This would put your business into further trouble.
With these strategies in mind, you can increase your chances of getting unsecured line of credit without having to incur personal liability on your part.
For more information on unsecured business lines of credit, visit http://www.buildingmybusinesscredit.com, a web site that provides business credit information to small and home businesses.
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