What you need to know about unsecured loans
Starting a business is a daunting process, and often it’s finding funding that can be the most unexpected challenge. For a small or new business getting off the ground, finding the backing of a big bank can be like pulling teeth. Regardless of how promising your business plan looks, or how revolutionary your product, being granted a loan without security can be near impossible.
1. You don’t need to use property as security
Most, if not all banks will require you to offer up property or other valuable assets to use as security against your loan. This means if you default on loan repayments, the bank can claim these assets in place of financial payments.
Unsecured loans mean exactly that, you don’t need to offer up security to be able to access funding. Instead, your loan is given to you on the merits of your recent cash flow and current financial standing.
What does this mean for you?
It means if you’re a new business, or a business without property, you can still get a loan if your cash flow is strong. Most small business lenders will require you to have been in business for a minimum of six months, and to provide at least your past three bank statements.
2. Your credit score counts
Have a terrible credit rating? Maybe you had some unforeseen circumstances wreak havoc on your financials years back, but your business is now on its feet and running a profit. Where a bank may not even look at you if you’ve got a less than healthy credit history, unsecured loans bridge this gap and look at your current financials.
However, while you can get an unsecured loan regardless of your credit rating, it does influence the cost of your loan. Having a bad credit rating may increase your interest rate and therefore the cost of your repayments. Don’t despair, however as successfully paying off a small business loan can help repair your credit rating, so be smart when borrowing and ensure you are meticulous with your repayments.
3. You can use unsecured loans to refinance
Small business loans are not just restricted to start-ups. There are a huge number of reasons established businesses run into cash flow troubles, or need an extra finance boost, and one way to tackle it is to refinance existing debt. Not only can an unsecured loan help you reduce your existing loan repayments, it can help put your debt in one place, making it easier to track and control your finances. Read our blog ‘why refinancing is the key to business success’ to learn more.
4. You can use an unsecured loan however you like
Whether you’re launching an innovative tech start up with market changing software, bringing on a crew to build up your business, opening your own café, or need a buffer for cash flow, unsecured loans are not tied to a particular expense or investment – meaning you have total control over how you spend and manage your loan.
5. Unsecured loans can be customised to work with your needs
Unlike many set personal loans, most unsecured loan lenders offer flexible repayment options so you can choose how and when you make your repayments. For some, weekly repayments would be a massive hassle, yet for others paying frequently gives them tighter cash flow control. There is a huge range of lenders and unsecured loan options on the market, so finding a repayment structure that suits you is almost guaranteed.
If you’re thinking of applying for an unsecured loan, talk to our team to find out the best option for you, obligation free.