Funding a New Business with an Unsecured Loan

By Jeff Brannon

We’re living in the age of the startup; in fact, the term “startup” is no longer exclusive to tech companies. If you have a new business, you have a startup. The question is, do you have funding? Unless you have a slick presentation ready and good connections who are willing to help set up meetings with investors, the answer is probably “no” – or at least, “not enough.”

So how can you get the funding you need to finance your new business? The best way, typically, is with an unsecured loan. Don’t let the term “unsecured” make you nervous. An unsecured loan is simply a loan that is not tied to any assets. In other words, it’s not secured to any collateral. It’s ideal for new businesses because generally, new businesses have fewer assets to offer up.

Also: Don’t assume that the only type of unsecured loan is a merchant cash advance. Everything you’ve heard about a merchant cash advance is true: It’s an expensive product with a high interest rate and a payment requirement that few businesses can keep up with (sometimes, it actually requires daily payments!). You don’t want that; you want monthly payments you can live with. That’s why you need a different variety of unsecured loan, like a growth capital loan or a cash flow loan. These are superior loan products that can be written up to $150,000; that’s enough to get a new business off the ground and then some.

The next point I want to make is the importance of choosing the right lender for this loan. Any new business should be wary of a lender that only has one product to choose from; in fact, lenders who only have one loan product are often not lenders at all. Many of them are simply brokers whose job it is to close deals and move on. That’s not what you want either. You want to deal with a direct lender, because only a direct lender has multiple loan products so that new businesses can get the right kind of unsecured loan for them.

And finally, some advice on how to present yourself to this lender. When applying for an unsecured loan, the number one goal is to tell a good story. Explain on your application and in your meeting why you need this funding, and how this funding is going to benefit your new business. Tap into your inner salesman to do this if you have to; treat the lender like a client you are selling yourself to. Show him that you understand the cost of capital, relative to the benefit of using the capital. This shows the lender that you have what it takes to make your business model succeed – which is important to the lender, because it demonstrates your ability to pay back the loan.

An unsecured loan is a great way for a new business to get financing right away. If you’re up against a wall when it comes to getting your new business off the ground, I encourage you to look into it.

Jeff Brannon is managing partner of Solve Capital Group. He can be reached at (949) 356-6601, or by e-mail at [email protected].