With the fiscal turmoil of the last few years, many small businesses succumbed to the economy’s wrath and now face some credit challenges. If you rely on banks for business loans, bad credit can easily lead you to bankruptcy. But thanks to the flexibility of bad credit unsecured loans small business owners have some options to save their business and to make a success of their brand and services. Or at least stay afloat until the business can be off-loaded when the economy improves.

How does it work?
A business line of credit is very different from how a traditional loan works. It has no fixed payment terms (really! see the next paragraph) and the interest rates are adjustable. Furthermore, it can only be used for your business and must be paid back. For example, if you own an auto mechanic shop and suddenly a vital piece of equipment broke down. The cost of replacing it is too much for you to simply go out and buy. By taking out a business loan you can invest in the machine and keep your business running while turning a profit. Your business can use these credit lines at any time up to a certain amount that is agreed upon by you and your lender.

Advantages and the downside
Business lines of credit are far more flexible than any loan type you can get through a traditional bank. If you can qualify for a secured line of credit loan it’s probably your best option, because unsecured credit loans have much higher interest rates due to the fact the borrower isn’t putting up any collateral. However, the interest rate is adjustable. Your loan rate is based on how quickly you can pay it back.

Saving small businesses when big banks don’t
Smaller lenders have a long history of saving small businesses when larger banks refuse to help. In a ‘USA Today’ article about how small businesses turn to alternative lenders in their time of need, there’s a story about a small business owner who sought a 50K loan from a big bank to buy toy inventory for his comic book shop right before the holiday season. He was turned down! (In the spirit of Christmas, ha) Instead, he sought help from an alternative lender who granted him the loan. This allowed the entrepreneur to not only expand his inventory, but thanks to the business loan, he was able to increase his annual revenue by 50 percent to $500,000 that year.

It is for reasons such as this that alternative lenders help stimulate the economy by helping small businesses succeed when big banks (the ones responsible for the bad economy) refuse to help small business owners who show projected profits.

Borrow responsibly
When contacting your lender be sure to speak with a professional and help them determine a good loan amount if you don’t already have a firm number you need to stay afloat. Borrowing responsibly is the key to keeping your business running strong.