A business is always in need of cash both for carrying out the day to day operations and planning expansion.

Every business owner is always on the lookout for the best loan options that would fulfill their requirements while not being a burden on the business. In this regard, unsecured business loans are one of the most viable options for any business.

An unsecured business loan does not require the borrower to put up collateral, which could be anything from their house to a piece of business equipment. 

Opting for an unsecured loan will allow you to make sure that all of these assets remain safe and sound.

There are five factors discussed below that affect your bid to qualify for a business loan.

Factors that Make You Qualify for Unsecured Business Loan

Before you even apply for an unsecured loan, you must be sure that it will get accepted. Thus you need to carry out a self-assessment of yourself. 

Taking note of the following factors is necessary. 

1. Understanding the application procedure

Business loans are rather technical, and the application procedure is lengthy. You must have an understanding regarding the factors that the lender will be looking out for, how long they will take to process your application, and how long it will take to get the actual disbursement of funds.

If you want the money on an urgent basis, most of the lenders will not fit the bill because of their long turn-around-times.

You should pay heed to the following points:

• Do you need the money on an urgent basis, or do you have time to see the application process through?
• Do you have all the necessary documentation that the lender will be asking of you?
• What is your current credit score?
• Will you need to mark a lien on an asset if the lender does not hold it as collateral?

If you prepare for all these answers beforehand, you will be in a much better position to qualify for the loan you are seeking.

2. Choosing the Lender that Suits You Best

You are seeking an unsecured loan. This much is clear. However, several loans fall within the same definition.

While the term ‘loan’ will usually conjure up an image of the traditional loan, there are certainly other forms of loans that will suit you just fine.

Take, for example, merchant financing. It does not require you to put up collateral with the lender. But this kind of loan can be held for only a short term while an SBA loan has a very long repayment term.

3. Comprehending the Interest Rate

Every loan carries a rate of interest. The rate varies from lender to lender, and largely depends on the amount being lent, the period of the loan, and the collateral (if any).

If the loan is unsecured, it will increase the business risk of the lender. Thus, they will charge you more interest to cover that risk.

Since the interest amount is built-in into the monthly repayment installment, you must be able to settle on an interest rate that you can repay easily every month without unnecessarily burdening your business cash flows. 

You must also keep in mind that you will be required to pay the lender’s documentation charges, processing fee, and the cost of inspections if they are needed. 

The rule of the thumb is that if you don’t have the ability to repay a loan, don’t go for it. 

4. Knowing the Requisites for Qualification

Most people use credit cards from different banks. This makes them think that a loan application works the same as the credit card. 

But this is not the case. The requisites for business loans are very different, and knowing that is the key to qualifying.

You need to research to seek out the best loan that serves your purpose. That loan should most likely be approved. Applying and being rejected for a loan that you will eventually not qualify for will only be a waste of time.

There are a few general requisites for an unsecured business loan:

• A good credit history
• Number of years you have been in the business
• Annual revenue

Every lender has its own set of procedures and credit evaluation. What worked for one may not work for the other. However, the above three requirements are a must for every lender and need to be fulfilled at the outset.

5. Organizing, arranging and preparing the documents 

This is the part that no one actually likes.

But, if you are prepared to take this head-on in the initial phase, you will save yourself a lot of trouble later. 

If your documents are ready and submitted with the application, your request will move faster without major hindrances. 

Usually, an application for unsecured loan financing will take longer, and if there is any missing information, it becomes the reason for further delay.

Moreover, the lender may ask you for a specific requirement. You will need to fulfill it before disbursement. 

6. Specify the amount that you want to borrow and how you will use it:

The lender will like to know the amount of money that you will require and for what purpose do you need it. Will you borrow the loan for expansion purposes or to improve your liquidity? Such matters play a vital role since the lender would be aware of the situation of your company so that they can get their money back. 

The Final Word

An unsecured loan is a viable option for obtaining cash for your business.

However, obtaining such a loan from a lender is not an easy process. The most important thing is to qualify for an unsecured loan from the lender.

Some of the essential factors involved in obtaining an unsecured business loan are stated above.

If you can take care of these factors, there is every chance that your application will be approved without delay.