An unsecured business loan is a type of business finance that allows you to access capital, without a need to have assets, such as vehicles, or property as security for the lender.
As the unsecured loan is not backed by an asset, lenders will offer a loan based on the creditworthiness and financial strength of the business. They will consider factors such as the business's revenue, cash flow, credit history, and overall financial stability.
Unsecured business loans can be used for various purposes, such as a working capital, to purchase inventory, expanding operations, or investing in new equipment.
It's important to note that while unsecured loans don't require collateral, lenders may still require a personal guarantee from the business owner.
An unsecured business loan provides your business with access to cash without needing any security or collateral. Unsecured business loans can be used for almost any expense and can be obtained much quicker than secured business loans.
Once approved for an unsecured loan, your business will repay it over an agreed upon period, usually a fixed amount each month, although this can vary depending on the type of unsecured business loan.
The lender will decide if you can get an unsecured business loan based on factors such as the turnover of your business, your profitability, your cashflow and how creditworthy your business is.
You will need a good business credit score to be approved for an unsecured business loan as this shows the lender you will be likely to repay it.
An unsecured business term loan provides a lump sum of money upfront. This is repaid by the business over a fixed term with regular payments. The length of the terms can vary depending on the business and lender, it can range from a few months to 5 years.
A revolving credit facility gives you access to a predetermined amount of funds that you can draw from as needed. Interest is only charged on the amount you borrow, and you can repay and reuse the funds within the credit limit.
Business credit cards are a type of unsecured business loan that can be used to cover various expenses. They offer a revolving line of credit, allowing you to make purchases and repay the balance over time.
Merchant cash advances are unsecured business loans that provide a lump sum of cash in exchange for a percentage of your future sales. The lender deducts a fixed percentage from your daily or weekly credit card sales until the advance is repaid.
Whether you're taking on a new project, looking to expand your workforce or simply need a hand covering the day to day running costs of your business, unsecured business loans can help to provide the working capital you need.
To be eligible for an unsecured business loan you’ll most likely need:
It's more challenging to get an unsecured business loan with bad credit, but some lenders specialise in offering loans to businesses with lower credit scores. Interest rates may be higher, and the loan terms could be less favorable. Find out more about getting a business loan with bad credit.
Yes, using an unsecured business loan to consolidate debt from various sources can help simplify payments and potentially lower interest rates, saving your business money over time.
You can improve your chances by maintaining a strong business credit score, having a solid business plan, demonstrating consistent revenue and cash flow, and showing how you'll use the funds to grow your business.