If you want a business loan but have no tangible assets to offer as security, an unsecured business loan might be the right choice for your business.

What is an unsecured business loan?

An unsecured business loan is a loan that does not require any collateral or security and instead is based solely upon the creditworthiness of the business and its owners.

Banks tend to only offer unsecured loans to directors who have an excellent credit score and a very established business and prefer to secure loans against some sort of collateral like property, equipment, and other valuable business assets.

However, in the last few years, a plethora of new alternative lenders have entered the market with some offering unsecured loan amounts up to £500,000, across terms of up to 5 years, depending on the strength of the business.

What are the benefits of unsecured loans?

Unsecured loans are a great funding solution for businesses that don’t own any assets or any company that’s growing fast and needs access to capital to keep things running smoothly.

Due to the fact that an unsecured loan is more risky to the lender, these loans tend to come with a higher price tag than secured loans. However, they also provide added flexibility on how quickly you repay your loan, with many alternative lenders offering penalty-free early repayment and some even recalculating the total cost of interest if you settle your loan early.

Additionally, unsecured business loans can be approved in as little as 24 hours. So, if you’re looking for short term finance to settle a due bill, or keep cash flow healthy, the time it takes to acquire an unsecured loan is a great benefit.

The common uses for unsecured loans

Generally, this form of debt finance is very popular among small to medium business owners as it can be very versatile. Common uses include:

  • Boosting cash flow
  • Business expansion
  • Buying new stock
  • Refinancing debt
  • Buying a business
  • Paying VAT

Unsecured business loan – key considerations

Speed: No valuations necessary means faster access to the capital you need

You don’t need assets as security: Making it a more accessible type of finance

Fee-free: There aren’t usually upfront fees, or they’re very minimal

Higher cost: Overall cost tends to be higher, because of the risk to the lender

Personal Guarantees: A lot of lenders ask for a personal guarantee to lower the risk

From high-street banks to alternative lenders, there are countless lenders offering different types of unsecured loans to businesses – all with their own eligibility criteria, application requirements and interest rates. Generally, unsecured lending is fast with flexible payback options however rates can range anywhere from 5% to 50% per annum depending on the lender. So, many businesses opt to work with a broker to ensure they are paired with lenders offering the best rates available to their business.

Personal Guarantees

A personal guarantee is a commitment from a director to pay off a loan in the event that their business defaults on the loan repayments, and it is becoming more common for lenders to request personal guarantees as a condition of a loan offer.

Although personal guarantees can feel like a big commitment, they often help companies secure higher levels of finance at more preferential rates.

How do I get a loan for my business?

At Fundaco we’re experts at taking the hassle out of a funding application. After just one phone with one of our team, your dedicated finance manager will use their expertise and experience to source the most suitable funding solution for your business and circumstances, often in as little as 24 – 48 hours.  

With minimal paperwork needed the turnaround for funding is normally a couple of days and we’re able to assist businesses where traditional finance falls short.

Not sure what type of finance you need?