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.
Loans are available between £3,500 and £500,000, up to 75% of your average monthly turnover.
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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.
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.
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.