Getting Unsecured Bad Credit Loans

by : David Castro

Let's face the facts: Businesses need cash to operate. During time of prosperity when sales are booming your business generates enough income to keep your business thriving. However, for many small businesses, a slow down in sales can create a cash flow shortage. Unless you have managed to build up substantial cash reserves, you will need to turn to lenders for the money to keep your business afloat.

While most lenders are willing to loan money to established businesses with solid credit history, it is another story entirely for newer businesses that haven't established that credit history. It is also difficult for businesses that have run into credit problems in the past. These businesses are left with trying to find unsecured bad credit loans.

While there are a number of lenders that offer unsecured bad credit loans, business owners need to be careful and do their due diligence before signing any loan documents. Repayment terms for unsecured loans can be significantly higher than for a conventional or secured loan. Owners cannot afford to let their need or desire for a loan rush into a bad credit arrangement with the lender. It is critical that the borrowers understand what the repayment terms for the unsecured bad credit loans are, and what the Annual Percentage Rate (APR) is being charged for the loan. While it may be possible to get the loan, repaying the loan may put the business in a bad financial position for years to come.

There are two forms of credit that are available to business owners; a business loan, and a line of credit. With a business loan, the borrower determines how much money they will need, and that amount is loaned in a lump sum payment. Interest is accrued on the entire amount of the loan, beginning the time the loan is made.

With a business line of credit a total amount available is set up, and the business owner will only borrow the amount needed at that time. As new cash needs come up in the future the owner can withdraw additional funds from the line of credit, just like withdrawing money from any other bank account. With a line of credit interest is only charged on the amount that is actually withdrawn from the account. This is a great option for newer businesses that will need periodic boosts to their cash flow as they attempt to get established. Money is available in smaller amounts, and they keep their interest payments at a more affordable level.

The methods of obtaining money may be different depending on the lender. Some are structured like more traditional loans, while some are based on credit card transactions. The lender will "purchase" a certain percentage of your credit card sales, and that percentage will go to the lender until the amount of the loan is paid off. While classified as an unsecured loan, it is in reality secured by the credit card transactions.

In a business that requires cash flow, it is critical that your business is able to get the money it needs, when it needs it. Regardless of whether you have a poor or unestablished credit history, there are unsecured bad credit loans available to those who look.