The business and finance world seems to be perfect for those with good credit scores and excellent debt history. Finding loans is quite the challenge for those with bad credit scores and finding loans without collaterals is next to impossible for them! Since it is somewhat precarious to lend the amount without payment security, unsecured loans often bear high-interest rates and higher APRs since they are high-risk loans. Running into cash flow problem is quite common among all business owners old and new. There are several traditional and non-traditional methods of funding business operations that can meet all your loan requirements and payment criteria. The only way to access funds right when you need them is to find a reliable lending company that is customer-centric.
Why are many small business owners and start-ups going to alternate business funding companies?
Several small business loan companies offer a plethora of services for those entrepreneurs with less than perfect credit scores. They offer many perks to these businesses over their favorable payment periods.
- There is no need for collateral.
- There are no credit checks.
- Several companies allow borrowers to use business credit cards.
- Entrepreneurs can open new lines of credit for business expenses.
- No hidden fees. Processing fees are transparent.
- Quick funding options.
These are better than the terms and conditions put forth by the traditional lending parties including banks, credit unions, and other financial institutions. The new small business unsecured loan companies and unsecured lines of credit providers will not ask you for your business credits, and they will not charge you astonishing APRs just because you lack the business experience certain conglomerates and business moguls do.
The advantages of opting for alternative small business funding for bad credit
Although these companies are for all kinds of borrowers, the ones with better FICO scores will get reasonably better deals. If your credit-worthiness is high, you can get up to $100,000 of spending limit on your business line of credit. Similarly, the small business lending companies can offer up to $100,000 in a loan to new entrepreneurs if their credit scores are reliable enough. Visit national debt relief sites to find out how you can work on your credit score and qualify for better terms the next time.
Borrowing without a stringent credit check is just one of the advantages of the alternative business lines of credit. Here are the rest –
High credit threshold – your new business line of credit will have an upper credit limit. It is excellent for funding start-ups, SMEs as well as larger businesses. There are several credit card companies for business owners that offer a 0% APR for the first 12 months.
Flexibility – with the new alternative methods you will enjoy more flexible terms of payment. You can opt for the monthly payment structures at flat rates, although paying more than once a month is not uncommon. Several business owners choose fortnightly payments for the first few months to save on APRs. There are no penalties for paying more or clearing the debt before the end of the term.
Quick cash – since these non-traditional lending companies bypass the FICO score checking process and several other verification details, the companies can process the loans faster. It, of course, helps if you have your necessary documents in order and if you can present a history of your financial profile. Many of these companies work online, and several of them process small unsecured business loans within the first 72 hours.
Protection of personal credit score – contrary to what most people may like to believe, the business credit cards report to the business credit agencies only. They do not affect the personal FICO score of the cardholder. The entrepreneurs can use these cards to pay for equipment, maintenance, upgrades and vendor charges over the months. A default payment will not drag their credit score down. That is a huge pro of working with the right companies that can treat you to a new business line of credit.
Lesser risk – no matter how large or small your business is, there is considerable risk in running a business. Even the best predictive analytics models and the largest big data pools can fail to predict how the market will react to a new product or how a business will perform six months from now. Using your home as collateral is a much higher risk since business failure will not just mean the loss of liquid assets; it will also mean the foreclosure of your home. Opting for unsecured loans instead will help you sleep better at night, knowing that your home and your personal finances are completely separate from the business lines of credit.
In addition to all the points here, the small business credit cards also offer signup bonuses for the users, and the unsecured loans for your business often do not require you to spend the entire amount on one company. There is an excellent amount of flexibility and rewards that come with non-traditional unsecured business loans and lines of credit. Thankfully, qualifying for a credit card does not depend on your business acumen or your personal credit history. It somewhat depends solely on your credit-worthiness that the company will weigh depending on many factors.
Be careful while searching for the perfect creditor
Be very careful while choosing any business loan or credit card company. The APRs can vary between 3% and 40%, and the interest rates can go up to 30%. On a $1000 loan with a 30% interest will amount to $21,600 after a three year payment period. That is quite a ridiculous amount, but there are small business owners and start-ups, which have fallen into the clutches of such unscrupulous lending agencies that charge sky-high interest rates or fees to hike the total payment. It is preferable for most entrepreneurs to go for fixed interest rates on their business loans, even if they may seem higher than floating interests for a month or two.