When it comes to growing your business, there may be times when you find yourself in need of some financial support. Whether it’s for expanding operations, purchasing new equipment or managing cash flow, securing the right type of financing is crucial.
One popular option to consider is an unsecured business loan. Chances are, if you’re in the process of researching small business loans, unsecured options have already cropped up.
But what exactly is an unsecured business loan, and how does it work? In this post, we’ll delve into the details, explore their benefits and explain what you can use them for.
What is an unsecured business loan?
To put it simply, an unsecured business loan is a form of business financing that doesn’t require you to provide security in exchange for the funding you require.
As such, it means that you and your business won’t be at risk of losing any valuable assets – whether that’s land, property or equipment.
It therefore makes them an attraction option for firms and small businesses that don’t have enough assets to present as collateral.
And since there are no assets to evaluate, the application process is usually much easier and simpler, and the loans are quicker to process too.
How do unsecured business loans work?
Unsecured business loans provide your company with up-front capital, without you having to use assets as security.
But before your loan application is approved, lenders will want to check that your business can repay the loan in the future. This is usually done by lenders checking the creditworthiness of your business, and can also require you to sign a personal guarantee.
A personal guarantee is a legal agreement that you promise to repay the loan with personal funds if your business is unable to do so.
When applying for a loan, lenders will often ask you to provide documentation, including copies of bank statements and tax returns.
The benefits of unsecured business loans
Unsecured business loans are advantageous for many small businesses. They give the flexibility and freedom that other forms of business loans aren’t able to provide.
Asset-free loans
As you don’t have to pledge any collateral in exchange for a loan, unsecured business loans are an appealing option for new businesses that don’t currently own major assets.
Easy application
The application process is quicker and more straightforward than for other types of business loans due to not needing to evaluate assets and valuables.
Less risk of losing assets
Since there is no need to put down assets as security, there’s a lower chance that your business will lose valuables if you’re not able to repay your loan. But remember that lenders can still file lawsuits to get back any unpaid balance by seizing business possessions.
How do you pay back an unsecured business loan?
Unsecured small business loans often have a straightforward repayment structure – such as fixed monthly repayments at a pre-agreed interest rate when you apply.
Payments are then made over your agreed loan term until the loan has been paid back in full.
What can you use an unsecured business loan for?
Unsecured small business loans are popular due to the freedom they provide in terms of what you can spend the funding on.
Whether it’s moving into new premises, helping with a recruitment drive or purchasing newer, more up-to-date equipment and machinery, the choice of how you use one of these loans is really up to you.
But be warned, unsecured business loans are limited to funding legitimate business expenses only.
Get an unsecured business loan today
Every business is unique in its needs, circumstances and goals. If you’re considering applying for an unsecured business loan, Funding Triangle can help you.
We supply small businesses with loans from £10,000-£500,000 with interest from 4.8%. With no security or assets required, you can apply today and get a decision within as little as one hour.
