Can Startups Apply for Unsecured Alternate Business Loans?

Can Startups Apply for Unsecured Alternate Business Loans?

Startups today constitute a significant part of the country’s economy. Never before have startups been supported by the government and press media as they are in support in the current decade, and things only seem to be getting better.

Many startups receive financial support from the governments in their initial phases. The support comes in the form of tax benefits, less expensive loans, limited liability terms about various factors, etc. But, not every startup ends up qualifying for or being able to reap the benefits of these loans. Furthermore, a few months down the line, most startup companies exhaust their initial funding support while they’re about to start making profits and this is when a little boost in funding not only helps the startup company survive but also helps it shine and prosper.

In such times, when most other loans may stop being an option, some alternate business loans may be the right choice.

What are Alternate Business Loans?

Business loans can be procured in many ways from various entities. Some non-bank direct lending companies can offer loans with more relaxed terms and minimal requirements. Apart from being easy to qualify for, these loans are also easy to apply for and quick at disbursal. To add to all that, such entities do not even need security against collaterals, hence making them very attractive. These factors make it a higher-risk form of lending for the lender, which together with the attractive ease of procurement, makes these loans higher in interest than the traditional business loans. Such loans are considered Alternate Business Loans.

What are the Basic Requirements for Getting Alternate Business Loans?

The lenders have certain discretion about what they mandate as a need for loan applications. Yet, some basic requirements are universal. At Business Advance Lenders, we stick to these basic requirements, and this is also reflected in our high acceptance rate of loan applications.

The requirements include:

  • Establishments need to have been for one year in business
  • Monthly revenue of $15,000 or a steady monthly cash flow

If these requirements are met, the following shall be sought for a loan application:

  • Business Federal Tax ID / EIN
  • Bank statements (past three months)
  • Credit card transaction statements (past three months, where applicable)
  • Lease agreement
  • Landowner’s contact info
  • Business owner’s SSN
  • Average monthly gross sales figures
  • Average monthly credit card sales figures (where applicable)

On provision and verification of these, loans are usually approved and deposited within a matter of hours or in up to 2 business days depending on certain factors.

Are there risks involved?

Any loan and also virtually any business transaction comes with associated risks. That said, various loans come with varying degrees of risk. Risks associated with loans include:

  • Interest rates
  • Delayed payment penalties
  • Non-repayment penalties
  • Bankruptcy-related risks

Alternate Business Loans do tend to be on the higher side of risk. Interest rates tend to be higher than many other loan products. Penalties may be higher, but since borrowers deal with lenders, there is room for negotiation and flexibility that can and sometimes does end up favoring borrowers too. The bigger risk is bankruptcy. These loans, being non-bank direct lender loans, are seldom covered by terms of limited liability that may secure the borrower’s finances during bankruptcy.

When can Startup Companies Apply for an Unsecured Alternate Loans

As mentioned earlier, most alternate loans need startup companies to be in operation and business for six months. This is because most laws to safeguard the loan lenders and cover unforeseen issues may not safeguard the lenders in higher-risk loans like these.

This is the reason why a startup company might need to be at least six months in the business plus have achieved a certain amount of monthly revenue in the past few months ($5000/10000), to be able to get an unsecured alternate loan.

When is it Safe to Apply for Such a Loan?

If you own a startup company and are planning to get an alternate loan, here are examples of situations in which that could be a useful tool in your business arsenal:

  • When the company is growing and in profit, it’s assessed that added capital can bring a great boost
  • When the company is about to turn to profits, and it’s been assessed that added capital is what’s needed to turn into profits
  • When the company needs to use funds to add services and products that are deemed to be of great value to the current customers

This is not an exhaustive list and other similar situations may be or more favorable too. This is also not a proven list that requires that such decisions are bound to be good. All suggestions above are intended to be examples for reference.

As you assess the safety and utility of a tool like an alternate business loan and understand that your startup may be eligible for one, you could apply for your loan from Business Advance Lenders for a quick response and reliable service.