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Business Loans Guide

Unsecured Business Loans

A guide to helping you understand and compare unsecured business loans online

How to find the most competitive unsecured business loans

When searching for business loans, unsecured finance is ideal for those who are looking to borrow a small amount over a short period of time. To help you find the most competitive business loans we have compiled this insightful guide.

What is the difference between unsecured small business loans and secured loans?

The main difference between these loan types is that secured loans require you to provide collateral in the form of physical assets. An unsecured loan is ideal for businesses which do not have this security, as a secured loan amount will be dependent on the value of the security you are able to provide. This means unsecured business loans for new businesses are ideal, as they may not have the assets to support an application for a secured loan.

If you are searching for competitive business loans, the unsecured loan interest rates and repayment terms will depend significantly on your financial position. As unsecured loans represent a higher risk to the lender, the borrower will need a good credit rating and an excellent financial history.

If you are looking for low credit business loans, unsecured business funding options may require you to provide a personal guarantee. If your business does not meet the strict criteria which is often required, a personal guarantee based on your own assets could improve your chances of approval. If you have an excellent personal credit rating, it might be possible for the lender to loan you an unsecured loan on the basis that you will be personally responsible for its repayment.

It is worth considering that a sole trader or partnership will always be personally responsible for repaying the loan, when you are searching for business loans, unsecured or secured.

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What are the advantages and disadvantages of an unsecured business loan?

If you are looking for low risk business loans, unsecured forms of finance are ideal as there is no risk to your business or personal assets, unless a personal guarantee is provided. Because the value of your assets is unrelated to the business loan, the application process is often much quicker and easier than a secured loan.

During an application for a secured loan, the lender will need to see documentation which proves asset ownership and current value. This can take time, so if your business needs access to funds quickly, an unsecured business loan is often a favourable form of finance.

However, this fast processing time and low level of personal risk will mean that you are charged a higher rate of interest. If you have a poor credit rating, you are likely to be offered a very high amount in interest compared to a secured loan for the equivalent amount. Although, there are many forms of unsecured loans available which can provide a competitive interest rate.

An unsecured loan will not put the assets of the business at risk, but if the loan defaults the lender is likely to resort to a debt collection process. This can be a very stressful and difficult position and may result in the business having to apply for bankruptcy if the debt cannot be repaid.

What unsecured business loans are available?

When searching for business loans, unsecured forms of lending are often more difficult to obtain as they represent a higher risk. However, our panel of more than 30 lenders are committed to providing loans to suit almost every business requirement. This means that we can help you find unsecured business loans for bad credit, even if your business does not have a desirable financial background or credit rating,

Our lenders can loan amounts starting from just £1,000 to a maximum of £20,000,000, with repayment terms from a few weeks to several years. There are a variety of unsecured loans available from those with fixed repayment periods to overdrafts and credit cards. The most popular forms of unsecured finance are often revolving forms of credit, which involve continuous flexible borrowing and a payment plan based on the amount borrowed, such as lines of credit, overdrafts and credit cards.

There are also a range of options such as invoice financing, asset financing and equipment financing which are naturally secured against themselves, without risking the existing business assets.

How to find the most competitive unsecured business loans

One of the most significant factors when applying for unsecured business loans is your credit rating, as it will determine which forms of finance are available and what the interest rate will be. Before searching for available loans, you should check your credit score as this will help you determine which loans you could be eligible for.

Our comparison tool is designed to make it as easy as possible for you to find unsecured business finance. The finance finder will ask you a series of questions which are designed to find out more about your business and the type of loan you need. By analysing simple details relating to your finances and how much you need to borrow, we can provide you with a list of potential lenders and loan types.

As you search through the list of business loans, unsecured loans are available in many forms, so we rank the options using a match score. This takes into account many factors, such as how much you need to borrow, the interest rate and repayment period. Once you find a loan which matches your requirements, the application process is very simple with loans often released within 24 hours.

Understanding the terms and conditions

In theory, unsecured loans will not put your assets at risk, however there are many ways in which the lender may try to reduce their risk if you are unable to provide collateral. One of the most common agreements will involve providing a personal guarantee, which effectively makes you the co-signer for the loan. This means the creditors could take your personal assets such as your home and car as repayment for the loan. This guarantee can cover assets you currently own and those which you may purchase in the future.

An unlimited personal guarantee is very similar, however on top of recovering the loan amount you will also be responsible for paying legal fees and charges associated with recovering the debt. In contrast a limited personal guarantee will set specific parameters on what the lender is able to recover. This is normally set as a financial amount and is common when there are multiple partners with responsibility for repaying the loan, as it divides the amount equally.

A blanket business lien is a legal claim over your business assets, regardless of whether the business loan is unsecured or secured. If a lender files liens for your unpaid debts, it is possible for them to sell the businesses assets to collect the outstanding amount, which could make your business bankrupt.

When it comes to securing an unsecured loan for a new business or an existing business, the forms of finance available can vary significantly. With so many aspects to consider in terms of interest rates and the various terms and conditions, we are always available to discuss the options available to you in more detail. If you would like to find out more about business loans, unsecured and secured, please contact our knowledgeable team today.

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