Businesses needing urgent funds often seek a loan without impacting the asset status. This is because they do not like to risk their priciest asset for short or small cash requirements. It helps them avoid the fear of losing the asset to the lender in case of default or non-repayment.
If you have similar fears but need quick funding for short or medium-term business purposes, unsecured business loans may help. These loans do not require collateral to qualify. Instead, you may get this by simply providing the strength of your credit score and finances. A business may get one with a sound revenue structure, business plan and potential to make consistent payments.
The blog states the unsecured business loans in detail and how to get them quickly.
How do unsecured business loans work?
Unsecured business loans work just like other loans. However, it is different from secured business loans in that it does not require collateral. Instead, you can get an unsecured loan for a fixed time if you meet the lender’s eligibility criteria. The general criteria to qualify for these loans are- consistent revenue, supported bank statements, a well-detailed business plan, stable finances with manageable debts, etc. Under this loan, you pay the loan repayments in equal monthly instalments. It implies that businesses can budget for the payments to pay regularly.
The interest rates stay competitive on unsecured loans. It is the reason businesses with low credit history struggle to get friendly loan terms. However, you can improve your chances of grabbing good rates by updating your credit profile, paying some of your debts and revealing a personal guarantee.
Even if you cannot pay or default on the loan, you never lose your asset. It is one of the benefits of this loan. However, the lender may take other actions, like reporting to the court. If the court rules in the lender’s favour, you must pay the dues within the time frame.
Pros and Cons of Unsecured business loans
Just like other loans, unsecured loans too have their pros and cons. Knowing the best pros and cons of using an unsecured loan will help you use it carefully for the right purpose. Let’s analyse:
| Pros of unsecured Business loans | Cons of unsecured business loans |
| These loans share minimal requirements and are easier to qualify for than secured loans | The absence of collateral as security makes these loans little competitive |
| It is usually quicker to get over other loans. This is because it does not require detailed documentation or asset-related information. | There is a cap on the amounts you can borrow in unsecured business loans. It is generally less than secured business loans |
| Businesses can use the unsecured loan for any purposes like- inventory updates, financing an equipment purchase or working capital needs. | Lenders may demand a personal guarantee if the existing finances do not meet their needs. |
Who provides instant unsecured loans?
Generally, the regulated loan providers operating as unsecured loan lenders provide quick unsecured loans to businesses. You may get instant decision business loans from the lender by meeting certain criteria. Though you may also get one through a broker, it may prove to be a hefty expense. It is because then you must pay a brokerage apart from the loan costs. However, with reputed lenders like 24cashfinances, you pay nothing upfront. Instead, you pay the loan in easy and manageable installments.
Who qualifies for a collateral-free business loan?
As mentioned above, these loans do not require hefty or cumbersome eligibilities to qualify. However, meet the below conditions:
- You are a limited company
- Your business is based in the UK
- You have been trading for at least 6 months in the UK
- You have the lowest monthly turnover of at least €10000
If you are a sole trader or have a non-limited partnership with less than 4 partners, you may get a minimum of €25000 for your needs.
How to get an unsecured loan for your business?
If you want an unsecured loan for your business, you must meet the above-listed eligibility criteria. If you satisfy these standards, you can allow the loan to be hassle-free. However, you must prepare your finances before applying for an unsecured business loan. Pay the due debts, improve your credit report and reduce dependency on credit cards for some time. Here is what happens next:
1) Identify your loan requirements
Knowing the purpose and the amount you need is the first thing to decide. It will assist you in borrowing the honourable amount. Moreover, it grants you time to brainstorm on ways to reduce expenditures for business purposes. For example, if you need £12000 to hire more individuals, check whether you can hire freelancers instead. It is a reasonable alternative to full-time employees. Decide the same by analysing the project length.
2) Explore the best loan rates
If you want the best loans for your needs, you may get them by exploring and comparing the terms. Identify the terms like- APR, interest rates, additional costs and terms and conditions before partnering with a lender. Comparing these aspects will give you a clear idea about the loan rates. Additionally, do not forget to check the extra charges like- prepayment rates. Familiarise yourself with certain hidden costs and enquire before applying.
3) Apply with the cheapest one
Apply once you shortlist the best provider by analysing the loan rates. You can do so by providing general details like name, contact number, amount required, and purpose. Check the spelling before clicking the apply button.
4) Identify the lender’s agreement
Soon after your application, the respective lender replies with an agreement stating the terms, interest rates, APRs, and other costs. Read the document in detail. Check the emails continuously for other requirements like- documents or personal guarantees ( if required). Under this, the business owners may be required to provide personal assets as a guarantee to get the loan.
5) Provide your consent and pay instalments
If you find the terms and conditions favourable, you can approve it by providing your consent and the required documents. Generally, you may need to provide a business plan, bank statements, company registration proof, and projects to get the loan. Once you get the same, you must pay the loan in relevant instalments up to the loan period.
Bottom line
If you want an instant loan for your business needs, unsecured business loans may help. You can explore and contact a reliable loan provider to get the loans. Check APR, interest rates, loan costs, etc., to get the loan. It will help you get the right loan for your needs. Moreover, check additional costs that may impact the loan costs.