Traditionally, businesses needed to present a security to be qualified to apply for a business loan. More recently, this no longer applies as a hard rule to follow. Non-traditional lenders and some banks now offer smaller unsecured business loans. These types of loans don’t require a guarantee and loans are based purely on the business’s ability to make repayments which are determined by assessing monthly sales and cash flow.
How to Qualify for an Unsecured Business Loan
Lenders vary in their eligibility criteria. However, borrowers will generally have to meet the standard business loan requirements to qualify for the loan. The general criteria are as follows:
- Business should be registered in Australia. Lenders typically lend only to sole proprietors or partnership.
- Business location or offices should be owned or at least been leased for a certain period of time.
- The business should have been operating for a certain number of years.
- Business’s credit files and the personal credit files of directors must be in good standing.
- Business should meet the minimum turnover requirement of the lender.
- How much can you borrow?
Lenders present different amounts for unsecured business loans. However, these loans ranges from $1,000 to $1,000,000. You might find that the total amount you’re qualified for is determined by your monthly revenues. For instance, if you make $75,000 income each month you could be qualified to borrow the same amount.
Application Process for Unsecured Business Loans
You can begin by searching and comparing unsecured loan options. These type of loan comes with a variety of features that you could check out in order to make a comparison. Here are considerations you have to look at when comparing.
1. Compare Interest Rates
This is an excellent approach to figure out how competitive the loan is. On the other hand, keep in mind that fees could also apply. Confirm this when you are making a comparison.
2. Associated Fees
Look into the fees involved. This includes upfront and ongoing fees that may affect your business loan. You may even have to pay other fees such as the loan documentation fee. Comparing the fees you should pay will help you decide which loan is more competitive.
3. Repayment period
How long will you have to pay for the loan? The duration of the loan will impact the total repayments you are going to pay. Work with a business loan calculator to find out what your possible repayments will tend to be and when you can pay back the loan.
4. The Total Loan Amount
Specific lenders have a minimum and maximum loan amounts that you can borrow. Make certain that the total amount you will need is being offered by the lender.
5. The Turnaround Time
How long can you get approval? Several lenders are now able to approve loan applications within just 24 hours. However, there are other lenders that much more. If you require finances within a specific time, be sure the lending company can accommodate this.
Prepare your Loan Application Requirements
Once you have compared your loan options as to rates, fees, and other features, get in touch with the lender that may work for you. The process of application differs throughout lenders, but you will typically need the following requirements to apply:
- Personal identification (driver’s license, passport)
- Business financial documents
- Business ABN
- Details about the directors and business partners
As a business requiring additional working capital, you can get an unsecured business loan. But first, you need to check on the eligibility specifications of the loan provider. There are two primary things to bear in mind prior to applying for this type of loan – how much will it cost your business and is your business able to pay for the loan.
Consider carefully your present earnings and cash flow. Learn how long the loan term is going to be. By including the monthly repayments as part of your budget, you will have a better view if your business can, in fact, afford the loan.