An overview of unsecured business loans by The Finance Business

What Exactly Is An Unsecured Business Loan?

An unsecured business loan is a loan offered by a bank or lending institution to a business. With unsecured business loans, the borrowing business is not required to place any personal or business assets as security against the loan. This makes it a highly viable option for many organisations of all sizes and one of the main reasons why is because it such a simple loan application.

Whilst banks dominated this sector, alternative finance providers are now the main players in this sector as their loans are much more flexible and much easier to apply for.

If you are looking for a property related loan, then you can apply for a commercial mortgage.

Unsecured vs. Secured

What’s The Difference Between An Unsecured Business Loan And A Secured Business Loan?

For unsecured business loans, the interest rate and repayments are fixed for the life of the loan.

Unsecured business loans are not fixed to a borrower’s assets, whereas secured business loans rely on them. Unsecured business loan interest rates have a tendency to be slightly higher than those of a secured loan’s as the lender’s option for recourse against the borrower in event of default are limited.

That said, interest rates have really come down as more competitors compete and more competition usually means lower rates and fees all round so ultimately, more lending competition is good news for the borrower.

Why An Unsecured Business Loan?

There are many reasons you may want to take out a loan as a business such as:

  • More autonomy to run your business the way you want to without outside interference
  • Pay off another director or shareholder
  • Pay a tax bill
  • Consolidate debts that your business has accrued
  • Freedom to sell assets if necessary
  • No supply collateral because no property or assets are involved
  • Easy to obtain compared to a bridging loan or similar

You may be under unreasonable pressure from your bank and require a loan to reconcile issues. Even if this is the case, unsecured business loans are easy to obtain and have minimal risk in comparison to secured loans. You do not need to supply collateral, whereas if your business defaults on a secured loan the lender can seize your property. 

Am I eligible For An Unsecured Business Loan?

A successful application is mainly based on your business and personal credit rating, your financial status, and the amount that you would like to borrow. The lender will assess the risk in offering the loan. This level of risk will then be reflected in the rate of interest within the terms and condition of your unsecured business loan.

Generally speaking, as long as you can produce 2 years trading accounts you should be fine.

Do you only arrange unsecured business loans in Liverpool?

No. Although we are based in Liverpool, we provide funding for businesses and property developers all over the UK, including Scotland and Northern Ireland.

The Finance Business terms

Every professional lender operates their own regulations. The Finance Business will consider your application for an unsecured business if your company has been trading for more than two years and you can provide two years worth of filed and formal accounts.

How Much Can I Borrow?

The Finance Business offer unsecured business loans for between £5,000 and £300,000 with rates starting from 8% APR which enables you to pay off your existing overdraft or invest in your business.

How Can I Use It?

Unsecured business loans can be used for:

  • Launching new marketing and advertising campaigns
  • Buying new business software
  • Building new websites
  • Purchasing stock
  • Carrying out expansion plans
  • Supporting the working capital
  • Supporting cash flow
  • Reducing your bank’s overdraft.

What are the risks?

Like any loan, as long as it is paid back on time each month then you will have no issues whatsoever.

However, if you do run into difficulty repaying the loan then you will need to make sure that you inform the lender immediately. Some borrowers tend to bury their heads in the sand which is the worst thing you can do.

Because this loan is unsecured, if the lender does have to take action to recover their money, fortunately you will not be in danger of losing your home because it was never put up as security for the loan. This is exactly why unsecured loans have proved to be so popular as the risk to the borrower is far less that it would be if they secured the loan against their home or other property.

Will I have to give a personal guarantee?

Not always. Some lenders insist on a full PG but others don’t. 

For more information about how we can help you get the funding you and your business require, get in touch with The Finance Business today for information about an unsecured business loan that can help your organisation.

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The Finance Business provide bridging loans and commercial mortgages

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