What is an unsecured business loan?
An unsecured business loan, unlike many other types of business borrowing, is not secured against assets or property.
Unsecured business loans are usually able to draw down quickly as there is no need to assess any assets or property. As such, valuations and conveyancing are not required.
How Do Unsecured Business Loans Work?
Business loans work in much the same way as personal loans. Once your application is approved, your loan is released in full to your bank account.
Once the loan is released to you, repayments will begin, usually paid monthly, over a term of 3-60 months. Each monthly payment is made up of both capital and interest, which means that if all of your payments are made on time and in full, your loan will be repaid in full at the end of the term
How Could An Unsecured Business Loan Benefit My Business?
Unsecured business loans can be used to release funds into your business and can have a huge impact on your continued success. Whether used to ease cash flow, or to fund expansion plans, when used correctly, business loans provide vital capital to help your business.
Our clients often turn to this type of finance to fund stock purchases, the hiring of new staff and the purchase of new equipment.
Where a capital injection is used to drive a business forward, the increased cashflow could be used to generate profits far in excess of the cost of borrowing.
What are The Advantages of Unsecured Business Loans?
There are a number of benefits, which has led to this type of finance increasing in popularity in recent years. The main advantages are:
Speed of Applications – Applications are often handled through online portals with automatic underwriting. This means that loans can be completed in a matter of days.
Choice of Lenders – As technology has improved, more and more lenders have joined the market. This gives business owners more choice and the ability to compare lenders to find a better deal.
Upfront Costs – Unlike other forms of borrowing, there are often no upfront costs when making a new application.
What are The Drawbacks?
Criteria Can Be Strict – As no security is offered, those with poor credit, or weak trading history may find it difficult to find a lender willing to accept them. This is due to the high risk nature of these loans from a lender’s perspective.
Rates Can Be High for Some Borrowers – As above, when a lender is willing to take on an applicant with poor credit history or trading performance, the rate charged may be higher than if security was offered.
The Monthly Repayments Will Affect Cash Flow – As you will have to make monthly repayments to repay your loan, your monthly costs will clearly reduce your cashflow. This must be factored in, and the borrowed funds must be put to good use to ensure that the loan is worthwhile.
How Much Can I Borrow?
Although the amount available to your business will vary depending on a number of factors, we can offer unsecured business loans from £500-£500,000.
The amount available to you will depend on the status of your business, including credit history and trading performance.
As a responsible lending partner, we always ensure that any potential loan repayments are affordable. As such this will be a major factor in deciding the maximum loan available.
How Much Will It Cost?
The rate charged will depend on your needs and the length of time the funds are needed for. However, our business loan rates start at 1.9% per annum.
How Quickly Can I Draw Down Funds?
We are committed to saving you time and money. As such, we always look to complete your application as quickly as possible. Decisions are usually available within one hour of your enquiry.
Once the application is submitted, business loans usually drawdown in 1-2 weeks. Where funds are needed urgently, funds can often be drawn down on the same day.
How Do Unsecured Business Loans Work?
Unsecured business loans are a quick and easy method raising funds for your business. They tend to be flexible, affordable and are ideal for businesses with few assets.
Loans are usually set up on a capital repayment basis, with fixed monthly repayments made over the agreed term. If the monthly payments are made in full and on time, the loan is repaid in full at the end of the term.
When taking out business finance on an unsecured basis, the lender will usually require a personal guarantee from the directors of the business. This acts as an assurance that you will repay the debt if the business were to default.
A personal guarantee makes you personally liable for the debt. This means that if the loan falls into default, your personal assets could be taken to repay the lender.
It’s important that you consider whether a personal guarantee is right for you before taking out a business loan. It is possible to insure personal guarantees, with the policy paying out in the event of the guarantee being called upon.
Why Do Lenders Ask for A Personal Guarantee?
As funds are offered on an unsecured basis, the lenders have very little scope to recoup funds should you fail to keep up the repayments. Limited companies benefit from limited liability, meaning that directors won’t usually be held liable for the debts of a company after it is closed down.
As such, a personal guarantee is used to ensure that the lender is protected and has more chance to get their funds back in the event of default.
Unsecured Business Loan Lenders
Times have changed and the first port of call for a business loan is no longer, for many companies in the UK, their own bank. With lending rules tightening up and applications seeming to take longer and longer, more and more people are turning to alternative sources of funding.
There are a number of lenders to choose from including:
- High Street Banks
- Peer to Peer Lenders
- Challenger Banks
- Alternative Commercial Finance Lenders
We help you to compare all of the above lenders from across the market, through one simple enquiry.
Are Your Lenders FCA Regulated?
We work with a variety of lenders and work hard to ensure that we only ever introduce our clients to reputable lenders. Unsecured business loans are not FCA regulated and as such, many lenders will not be regulated by the FCA.
Although these loans are not FCA regulated, some of the lenders are and where it is important to you, we will do our utmost to ensure that your application is placed with an FCA regulated lender where possible.