Categories: Podcast

105 – Do More Deals With Unsecured Lines Of Credit with Leo Kanell

Synopsis

Leo is the founder of Seven Figures Funding, where he helps his clients obtain unsecured lines of credit for business purposes. In this episode, you’ll learn how to use unsecured lines of credit to do bigger deals without worrying about saving for the down payment! You’ll also learn how to obtain business lines of credit that have no personal recourse if you default on the loan.

Key points

Your personal credit score is incredibly important. It gives you access to funds that enable you to do bigger deals. You’ll need about a 680 credit score to start, so make sure you pay your credit card bills on time and keep your utilization ratio low! These unsecured lines of credit have higher rates, so be sure that you’re not using these lines of credit to pay for parties or a new car. Use them properly, and you’ll be able to scale your business to the next level!

Getting Into Credit And Financing

To start the show, Leo introduced himself as one who helps entrepreneurs with funding, building corporate credit, and financing so they can take on bigger endeavors or multiple projects in the case of real estate investors. He started by helping his friends and family with financing. He realized that was a real need for it, especially with unsecured funding where there is no required collateral. Leo has been helping businesses for the last decade.

How They Do Things

Leo briefly shared the basics of how their process works. In a nutshell, they have created a marketplace that consists of all the different types of funding sources, from small credit unions, private money, venture capitals, to private banks. As for their clients, they get a snapshot of their credit, does the underwriting, and create a custom funding plan with four to five different funding sources, and get them the cheapest money that they qualify for.

About Unsecured Lines Of Credit

Banks may be willing to give somebody something without anything to back it up because, as Leo explains, unsecured rates are more expensive than secured ones. He goes on to share that it can be a better option since there’s no collateral required with rates that are at par with hard money.

Types Of Unsecured Lines Of Credit

Unsecured lines of credit can be utilized in the form of a business line of credit. As Leo shared, it is what most of the people are looking for, but it is the most difficult to be approved for. There’s also the personalized line of credit which is based on the personal credit, personal income, FICO score, and credit utilization which means you should have paid at least half of your credit limit. He also discussed business credit cards that can be used by investors for their projects at 0% APR for the first year. Leo stressed that a lot of what they do is to help people determine the best type that they qualify for.

Impact Of Multiple Credit Cards To Credit Score

Asking Leo if multiple cards negatively affect the credit score, Leo clarified that new accounts and inquiries only account for 10% of the profile. What makes a bigger impact is how much of your credit you use. That means maxing out your credit cards will negatively affect your credit score worse than opening several accounts because 30% of your score is “utilization”. If you pay it down again, however, your score will shoot back up.

Understanding How Credit Works

It’s advisable to only use unsecured credit, or credit in general, for business purposes or things that will generate money instead of things that won’t. And once you make that money, you have to have that discipline to pay off what you owe. It’s how you strengthen your relationship with lenders, being a responsible creditor. That way they will trust you with more credit by increasing your limit, which you can use for more business.

Why Go For Unsecured Lines Of Credit?

Unsecured rates are always going to be higher versus its secured counterparts. But what it does is it gives you access to cash that you can use to take on a project which you wouldn’t be able to otherwise. As Leo points out, it doesn’t make sense to use it for personal purposes. It will be more expensive for sure. But if it will allow you to make a bigger profit on your next flip, it’s worth it.

Building Up Your Business Credit Score

One of the things that lenders look at when someone applies for unsecured lines of credit is the corporate credit. Answering how to build up business credit for businesses that are just starting out, Leo shares that the way to do it by going to the right vendors who will actually report your payment history to the bureau, because some don’t. The next step then is to build up more history and larger credit limits. Corporate credit can be built up within 6 to 12 months.