I see a lot of websites and emails where companies and individuals claim to offer Unsecured Business Lines of Credit or other forms of unsecured business funding. Often times if I don’t know the company or the person I’ll inquire just to see what it is they are offering. It’s amazing what I find. Of course, I have an advantage because we’ve offered unsecured business credit and we work in this space every day so I can ask questions that I already know the answers to. It’s amazing the mis-information, bad information, and out-right lies that I’m told. We help fund new companies all the time but when you’re looking for a small business start up loan it’s even more confusing and difficult to understand what your options truly are.
A Merchant Cash Advance is NOT an Unsecured Business Line of Credit
One of the most common things I see are people who want to take credit card statements and offer MCA’s or Merchant Cash Advances. First of all, these are VERY high cost loans and secondly, they are almost always loans and not lines of credit. Thirdly, they take a UCC against your business and UCC’s are a form of collateral. So we’ve already got some problems – the “lines of credit” are actually loans, plus they are very costly, and they are not really unsecured. So the next time you’re looking for unsecured business funding make sure you ask if they are really trying to get you an MCA loan that requires a UCC or is it a line of credit with a reasonable interest rate and NO collateral?
The Lie: If you build your business credit then you can get a business line of credit with no collateral and no Personal Guarantee
This is another area where confusion abounds. We are big believers in the importance of building your business credit. This is a wise and intelligent decision for any serious business owner who is planning to build and grow a viable and profitable business. However, we have excellent business credit at Hawkeye Management and we’ve yet to find anyone who was able to get us an unsecured cash line of credit without a PG (personal guarantee). Additionally, if you’re looking for an unsecured business credit line and you understand that you will need to personally guarantee that loan then you’re half way there. But, it’s actually not necessary to have good business credit in order to get an unsecured “cash” line of credit. Your personal credit is more important than your business credit for an unsecured cash line of credit. Again, it’s still a good idea to build your business credit but it’s not for the sole purpose of getting a small business loan.
If you want or need a small business start up loan or a business line of credit for your business then join the club. After all, who wouldn’t want $50,000 or $100,000 in unsecured business funding to either start, build, or grow their business? Just don’t let someone scam you or sell you a bill of goods or some other kind of lie. Find out how long they’ve been in business. Check their Better Business Bureau rating…keep in mind that if there’s not a BBB rating then that doesn’t mean it’s not a scam – it just means they haven’t been around long enough or doing enough business for the BBB to give them a rating. Several years ago I used to work for the BBB. I realize there are exceptions to every rule but if someone has a B- or worse grade from teh BBB then be careful. There’s a reason why it’s that bad. Look for companies with A ratings or maybe a B+ preferably. Check out their website. Are their names and real contact information clearly displayed or is it one of those websites with no names and no addresses (or the address is a dropbox)? Do they require up-front fees? If they can get you the funding they claim they can get then why do they need their money up-front? An early payment “option” is ok but required funds before delivery is a different story.
Unsecured Business Funding Conclusion
Don’t draw the conclusion that something isn’t real just because someone scammed you. Unsecured business funding is very possible but you’ll also find a lot of people who are not experts but who claim they can help you. These are the “wanna-be’s” and then there are the scammers who are simply looking to take your money. We all make mistakes in business but you can avoid these mistakes with some basic due-diligence. You should always check out the company with the Better Business Bureau and I think it’s also wise to be careful whenever someone charges you up-front fees. Those packages that require up-front fees can range from $150 to $5000 or even more but why pay someone any fee when there are scores of other companies who will do the same “up-front” work (at no charge to you) to make sure you qualify and match you with the right lending solutions and lenders? I’m familiar with many of the companies who charge these up-front fees to “match” you with lenders and most of them have great stories about why that’s a good idea or they’ll try to impress you with their package, the number of lenders in their network, or some other fancy selling point. None of them have been around as long or invested as much as companies like Hawkeye or Lendio and the matching process is completely free with us.
