How to Apply for Unsecured Business Loans
Business owners often apply for unsecured business loans because, in the absence of collateral, the application process does not take long. Some unsecured loan applications are received, reviewed, underwritten and approved on the same day. Business owners can use unsecured loans for any legal business purpose. Both large and small companies can apply for unsecured business loans. Term times are usually much shorter on unsecured loans than loans tied to collateral because banks are reluctant to commit to long-term loans with no recourse.
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Instructions
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Locate the articles of incorporation, partnership agreement, business license or other document used to register your business with the state. Find the tax identification number for the business and photocopy the last two years of business tax returns. Ask your accountant to prepare a cash flow analysis and a list of the company's assets and liabilities. Print out two months of statements for all of the business accounts.
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Photocopy your own tax returns for the prior two years. Write out a personal financial statement that lists all of your own assets and liabilities. Print out two months of statements from your bank as well as any brokerage accounts that you have. Go to the Internal Revenue Service website and print out a 4506-T request for transcript of tax return. Complete and sign the form.
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Go to the bank and give the business banker all of the documents you gathered for the business as well as your own information. Anyone else owning 20 percent or more of the business must also provide the bank with the same personal documents. Ask the banker to submit an unsecured loan application and, if necessary, sign an application form. Give the banker your consent to check your credit and other owners must do the same. The banker should approve or deny the application within a few days. Agree upon an interest rate and loan amount and sign the loan documents. All owners with a 20 percent or more share of the company must sign the loan as guarantors.
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Tips & Warnings
Generally, lenders offer lower rates on loans secured by some form of collateral. If a borrower defaults, the lender has a claim on the collateral and can sell it to offset the loan, whereas unsecured debts are more likely to cause a total loss. You can use a home, vehicle, business location or equipment as collateral for a loan.
Some business loans have variable rates that change each year. Many loans are attached to the prime rate and interest goes up whenever the prime rate rises. You should ask about the rate maximum for the loan before agreeing to it and shop around for loans with lower rate caps if your lender offers unfavorable terms.
