For many businesses, it isn’t practical or even possible to get a loan based on assets. This is especially true for small companies, either when you’re just starting out or because you don’t have the assets to support a loan application in general. But for those still looking for that extra financial boost without the asset requirement, there’s a solution.
An unsecured small business loan is the right fit for many businesses across the UK, offering smaller-scale operations a way to invest in their growth and development up front. Whether you’re looking to purchase new equipment, rent a property, or even improve the quality of your advertising, an unsecured small business loan can provide what you need to get that headstart.
So when it comes to the sometimes-confusing world of finance, knowing which way is up when it comes to your loan application is an excellent place to start. Read on to find out more about unsecured business loans, and discover if they’re the best fit for your business plans – and your budget.
- What is an unsecured business loan?
- How do unsecured small business loans work?
- Who are unsecured business loans for?
- What can an unsecured business loan be used for?
- What are the advantages of choosing this type of loan?
- What businesses qualify for an unsecured business loan?
- Will I require security or a guarantee to apply?
- How can I apply, and how can I make sure I’m approved?
- Fast Unsecured Business Loans Up To £150,000+ Available Now
What is an unsecured business loan?
Unsecured business loans are a type of funding that doesn’t require the business to put up any personally owned and business-owned assets up as collateral. This differs from secured business loans, which require the finance to be backed by an asset of some type.
Because no assets are secured against an unsecured loan, it’s a requirement in the majority of cases that the person taking out the loan – the borrower – has an excellent credit rating. This positive credit rating should be in addition to a full, excellent financial history and a well researched and planned forecast for cash flow. This helps the lender to identify the risk of lending to the business, as well as checking if the required payment would be possible and sustainable for the business.
These extra precautions are in place to ensure the business borrowing the finance can continue to make the required payments to pay the loan in full. Because of this higher risk, unsecured business loans often have a higher interest rate. However, unsecured loans also tend to have a shorter payment period, making it suitable for growing businesses in need of immediate money to expand or develop further.
How do unsecured small business loans work?
While a secured small business loan works on the basis of the borrower lending against assets they already own – whether it’s equipment, property or anything else – an unsecured loan takes a different approach. These types of loans work based on the lender having greater insight into the business’ incoming and outgoings, and as such may require a more in-depth process to offset that risk.
In an unsecured loan, the borrower doesn’t need to have specific collateral in place as security for the loan being accepted. Therefore, the process involves providing the lender with an overview of the cash flow of the business, as well as often requiring an understanding of what the loan will be used for. This could be equipment, staffing or any other business purpose.
As with any form of a loan, the loan payment is paid to the borrower up-front on approval of the loan itself. The borrower must then pay the loan back – plus the agreed on interest or other cost by a date decided by both the lender and the borrower.
Who are unsecured business loans for?
Unsecured loans, especially business loans, are suitable for any type of business. They are especially useful for companies that have few tangible assets or have little of value to provide as security for a loan. These types of businesses are more and more common, with many digital companies, in particular, having few assets to place against a loan.
As such, for businesses without assets, such as software development companies or even consultants, an unsecured business loan is the ideal solution to access the money your business needs quickly. From cake makers to graphic designers, many businesses just don’t have the expensive equipment or assets to justify a large secured loan.
For some financial options, small business directors or owners can also use a personal guarantee as a different form of asset as part of an unsecured loan. This makes that individual tied to – and personally responsible for – any lending as a result of the agreement. For some small businesses considering an unsecured loan, this can be the right solution.
For businesses that do have access to those kinds of assets, such as a construction company or laboratory, a secured loan may be a better choice. But for those small businesses without that collateral, an unsecured business loan is a valid alternative that’s suitable for many different purposes.
What can an unsecured business loan be used for?
Businesses choose to take out unsecured business loans for a range of different business-based reasons. These range from immediate needs to long-term plans, but some of the most common things unsecured business loans can be used for are the following:
- Helping with cash flow in the short term, to tide the business over during a quiet period ordifficult time
- Investing in the future of the business with new equipment, renting new spaces and overallexpansion plans
- Hiring new staff members to improve future business and profits in the long term
- Replacing broken-down or older existing equipment, machinery or to account for accidents anddamage to required equipment
Paying one-off business expenses, such as upgrading equipment, paying fees or even the costsfor training and certification
- Paying off existing debts and owed money to contractors, suppliers or other partners
All of these and more are legitimate reasons that a business may choose to take out a business loan. The purpose of this loan could be for short-term needs or can be put to use for longer-term purposes. If you are the sole owner of a business, different rules may apply to if you are the director of a larger company that requires money. However, it’s generally not recommended and often not permitted to take out a business loan for personal purposes, and some lenders will ask for information about your plans for the investment, should it be approved. Remember that if you take out a personal guarantee against a loan, anything you own personally can also be at risk if you fail to pay back your loan.
What are the advantages of choosing this type of loan?
If you’re a small business owner or director, there are plenty of advantages to choosing an unsecured business loan. It’s important to weigh up these advantages against your requirements for a loan, especially as these types of loans can often have higher interest rates, as well as requiring an excellent credit rating.
Here are just some of the reasons that business owners choose unsecured loans:
- A low-risk form of a loan, as it’s not secured against either your personal or business essets
- Often a more straightforward, quicker process that doesn’t require the same level of underwriting or information as a loan secured against documented assets
- Easy to obtain for businesses with a high credit rating, and good credit history<
- A higher chance of unsecured loans being discharged in the case of a business becoming bankrupt
- Access to money for investment in a business that would be inaccessible through other means, due to a lack of assets
For businesses, loans can be a vital part of the process of expanding and evolving what they can offer. With an unsecured loan, they can access that money to invest in their business without the risk involved with securing capital against existing assets. This makes unsecured loans the top choice for a wide range of small businesses across the UK.
What businesses qualify for an unsecured business loan?
Many different businesses can qualify for a personal loan. The most important factor isn’t the nature of the business itself; it’s the amount you need to borrow, and the cash flow and credit rating of the business itself. But for companies with few or no assets, unsecured business loans are the ideal choice. Here are just some of the business types that may qualify for unsecured loans:
- Software or app creation companies
- Marketing or consulting firms or single-person businesses
- Online services or support
Of all the businesses that qualify for unsecured personal loans, lenders often require the business to have been running for six or more months and have an excellent annual turnover of profits. While this is not always the case, these factors are important enough to consider before approaching a lender for a loan.
It’s also essential that the business has a UK-based bank account, and that it is registered in the UK as a limited company, LLP or sole trader. All of these factors qualify a business to be eligible for an unsecured business loan. It is because of the lack of assets that lenders require these extra qualifications, to reduce overall risk and ensure that the finance of their choicer is affordable for them.
Will I require security or a guarantee to apply?
Unlike a secured business loan, unsecured loans do not require businesses to offer upsecurity – or assets – to apply. However, there are other ways that borrowers applying for a loan can improve their chances. One of these ways is through requiring a form of guarantee to ensure the debt can be paid off in full.
For sole traders or partnerships, a personal guarantee is required which places the borrower in a position of being personally liable for any debts unpaid. This means personal assets – such as houses, cars and other objects of value – are used as a guarantee to ensure payment of the loan.
In the case of limited companies, a personal guarantee may also be required, depending on other factors in the applications process. The process of applying for an unsecured business loan may vary from case-to-case, so it’s important to understand that a guarantee may be required for success.
Our unsecured business loan calculator
Are you considering an unsecured business loan? With our specifically-designed calculator, finding out if you’re eligible for a loan – and the value that you can apply for – takes seconds. Try it today to discover if an unsecured business loan is a right fit for you:
How can I apply, and how can I make sure I’m approved?
At Capify, the applications process for our unsecured business loans is as comfortable as possible. Our transparent applications process is quick and straightforward, allowing you to gain access to fund from £3,500 to £150,000 for your business in next to no time. Our repayment structure is geared towards helping small businesses, and helping them manage their cashflow.
Using the slider on our website, just adjust your loan request and the repayment terms that suit you, then click to apply. After filling out a short form, we’ll do the rest – no need to wait around. We’ll let you know our decision as soon as possible, allowing you to invest in your business sooner. We’re proud to say that over 90% of qualified applicants are approved quickly.
So, how can you make sure you’re approved for your Capify unsecured business loan? Ensure all the information you give to us is valid and accurate, and use our loan calculator to have a better idea of whether the loan amount you’d like to borrow will work for you. Ensure your credit rating is good and your cash flow is up-to-date, and you’ll be in with a far better chance of approval.
We want to help you do all you can to make your business better. If you’d like to talk to us personally to discuss your loan, or you have further questions about the approvals process, get in contact with us today. We’d be happy to help transform your business plans into a future reality.
Fast Unsecured Business Loans Up To £150,000+ Available Now
Getting an unsecured business loan is something many small and medium-sized businesses would like to do, but they are unsure of the best option and are worried about the time consuming application process and the possibility of being turned down from the banks. Thankfully, the banks are not the only source of unsecured business loans.
Capify offers a quick, easy and transparent application process and you can access funds from £3500 – £150,000 to invest directly into your business.
What is great about this particular loan is the repayment structure, which is based upon small, automatic daily amounts, giving you tighter control over your cashflow.
In fact, from the start of the process to the end, everything to do with this loan is completely straightforward and transparent. This means that you can micromanage your finances with confidence, having greater control over your financial situation as a business owner.
Capify aim to provide flexible, unsecured finance that fits the day to day needs of small to medium sized businesses enabling them to continue to trade and expand efficiently
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