Obtaining an Unsecured Business
Loan
In business, obtaining an
unsecured business loan is probably one of the most difficult feats. This is
especially true given the current nature of our economic climate and ongoing
regulatory changes for lending. Unlike the earlier part of the past decade,
banks and finance companies in the wake of the fallout from the housing market
have increased lending standards across the board. As we have discussed in
previous articles, while interest rates have remained low, banks and finance
companies have still put substantial restrictions on the business loans that
they grant. This is primarily due to the “fear factor” that is still coursing
through Wall Street regarding the securitization and aggregation of closed
business loans.
In regards to securing an
unsecured business loan, the key is that you must have an expansive credit
history coupled with an expansive business history. At this point and time, it
has become nearly impossible to obtain a secured business loan or other
unsecured credit facility. As such, it is very important that when you approach
a potential lender for an unsecured loan that you have both of the
aforementioned components for both your personal financial situation and your
business financial situation.
Today, the only time a bank or
finance company will grant an unsecured business loan is if your business
already has substantial assets and an extensive history of generating a positive
cash flow. Companies that fall into this category typically consist of
professional service firms such as medical practices, law practices, and
accounting practices wherein the professional can always earn an income from his
or her services. Outside of professional practices, healthcare companies are
typically able to receive unsecured business loans although this is become less
frequent given the recent changes in healthcare legislation.