What are unsecured business loans?
In contrast to secured business loans, unsecured business loans don’t require company assets as security, but lenders may ask for a personal guarantee. This is a written promise from a business owner or executive that guarantees payment on a loan if the business fails to pay. As it's unsecured, a personal guarantee is not tied to a specific asset.
It’s also worth considering that lenders don’t have the same level of security with an unsecured loan as they would with a secured loan. As a result, they tend to levy higher interest rates on unsecured loans. Although this kind of lending tends be an easier process for borrowers, it could turn out to be the more expensive option, so make sure you read each lender’s products details before committing.
Unsecured business loans – key considerations
Unsecured business loans are generally seen as a more accessible form of business finance because they don't require any assets as security. They can also be deposited in less time than a secured business loan because there's not usually any need for property valuations and drawn-out legal processes. This makes them an attractive option for fast-growing small businesses that don't own many assets and need quick access to finance.
However, while the initial cost of an unsecured business loan might be lower than a secured business loan, the overall cost of the loan could be higher because the lender will be opening themselves up to more risk by not taking any security. There will also be a limit to how much a lender is willing to lend unsecured, which could be anywhere between £200,000 and £300,000, depending on the lender. Therefore, you will probably need to provide some security if you're looking to borrow a higher amount.
Unsecured business loans from Fleximize
Fleximize’s Revenue Advance offers the benefits of an unsecured business loan, but without the cost of fixed monthly repayments. Rather than having to pay back the same amount each month, Fleximize simply collects an agreed percentage of a company’s monthly revenue until the loan is paid off in full. This makes it an attractive option for businesses with seasonal sales patterns.
For business owners seeking a traditional fixed-installment loan, our Flexiloan might be just the funding solution you’ve been looking for. Offering £1,000 to £200,000 on flexible terms of one month to two years, the Flexiloan comes with no upfront fees or early repayment charges. Business owners also have the option to top up their loan after three successful repayments, and take repayment holidays when the slower months hit.
Will my credit score affect my application?
While a poor credit score was once a real barrier to raising funds, today’s specialist SME lenders will tend to look at the bigger picture when evaluating applications. As long as you can prove consistent performance and steady growth, and that you’re a limited company or partnership, an injection of cash will be a very real possibility.
Still unsure about unsecured business loans?
If you’d like more information about unsecured business loans before making that crucial application, why not speak to one of our experienced relationship managers on 0207 100 0110? Or simply browse our services to find out more.