An unsecured business loan is a way for a business to borrow money quickly and easily, without using any assets to guarantee the loan.
A secured loan is tied to specific assets, meaning if the borrower can’t repay, the lender can sell those assets to recover some or all of the amount borrowed.
This method of borrowing is extremely popular with businesses needing to raise finance.
These benefits include:
Quick to arrange - An unsecured loan can be set up within just a few days, giving your business fast access to additional working capital.
Flexible - Because it’s quick to arrange, you can usually set up a loan at short notice. If circumstances change again, you can often repay it early and save yourself interest. Or you can put the funds to work in another way. Business assets are protected - No assets are used as security for the loan, meaning you are free to manage your assets as you choose.
Fewer upfront costs - There are no assets to value and no legal costs associated with unsecured loans. This helps keep the costs low, both in money and your valuable time.
Loan amounts can be relatively small - Depending on your circumstances, you may only need a loan of a few thousand pounds.
Loans available to suit many different situations - There are many different types of lender, each with their own preferences and criteria for who they lend to. Whatever your circumstances, there are likely to be lenders who can help.
Why businesses take out unsecured business loans
Whatever the reason, it’s usually associated with growing the business in some way, which will provide the capital to repay the loan and bring in revenue that more than covers the interest costs.
However, sometimes a business needs to borrow because it’s necessary. Reasons for this can include:
If a major customer suddenly fails to pay on time, a tax bill is larger than expected, or a major cost is incurred with little warning, your business may find itself facing a cashflow problem. In this situation the loan is about keeping the business going, rather than planned growth.
Whatever your reason for needing additional finance, an unsecured business loan is often a cost-effective and convenient solution.
Are there specific requirements for an unsecured loan?
Every bank or other lender has their own requirements and criteria. Typically, this includes some evidence of trading history, providing access to your bank statements and providing evidence of future business plans.
Most lenders want the confidence that your business is viable. This means they are looking for some trading history, typically of at least six months.
Most unsecured business loans are underwritten with a personal guarantee from a director of the business. That is, the director commits to take on responsibility for repaying the debt should the business fail to do so.
You will typically repay an unsecured business loan in equal monthly instalments, usually spread over two to six years. These repayments include both the capital sum and the interest charged. Because the repayments are the same each month, your cash flow planning is made easier.
Would your business benefit from the flexibility and convenience of an unsecured business loan?
Disclaimer: JD Capital Finance helps UK firms access business finance, working directly with businesses and their trusted advisors. We are a credit broker and do not provide loans ourselves. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. JD Capital Finance can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. JD Capital Finance may receive a commission or finder’s fee for effecting such introductions.