Unsecured Business Loans – Fast Funding Without Using Your Assets
Running a business often means needing quick access to finance. Whether you’re covering short-term expenses, investing in growth, or smoothing out cash flow, finding the right loan can make a huge difference.
An unsecured business loan can help you do just that, without tying up your assets as collateral.
Unlike secured loans (often referred to as Asset Backed Loans – ABLs), which require property or equipment as security, an unsecured business loan relies on your business’s creditworthiness and financial performance.
That makes it a flexible and accessible option for many business owners looking to move fast without risking their assets.
What is an Unsecured Business Loan?
An unsecured business loan allows you to borrow money without offering any asset as collateral. The lender looks at your trading history, turnover, and credit score to decide how much to lend and on what terms.
Because the loan isn’t backed by an asset, it carries more risk for the lender. This usually means higher interest rates and shorter repayment periods compared with secured loans. However, the lack of collateral makes it ideal if you prefer to keep your business and personal assets safe.
In some cases, lenders may ask for a personal guarantee. This is a legal agreement that you’ll personally repay the debt if your business cannot. While this does create personal responsibility, it also helps lenders feel confident lending to smaller or newer businesses.
How Unsecured Business Loans Work
The process of getting an unsecured business loan is usually faster and simpler than applying for a secured loan. You’ll be asked to provide details such as:
- Your trading history and annual turnover
- Business bank statements and recent accounts
- Your personal or business credit score
- The amount you want to borrow and repayment term
Once submitted, lenders assess your ability to repay the loan and make a decision, often within a few days.
Repayments are typically made monthly over one to five years. The amount you can borrow depends on your turnover, cash flow, and the strength of your financials.
Find out Your Options
The Benefits of an Unsecured Business Loan
Choosing an unsecured business loan can bring several advantages for business owners looking for flexibility and speed.
Quick Access to Funds
Because no asset valuation is required, the application process is faster. This means you can access funds when you need them most, whether to cover a cash shortfall or seize a new opportunity.
No Asset Risk
Your property, vehicles, or other assets aren’t used as security. You can borrow with peace of mind knowing your business and personal possessions aren’t at risk if you default.
Fewer Upfront Costs
Secured loans often come with valuation and legal fees. Unsecured loans avoid these extra costs, helping you keep more money in your business.
Flexibility in Use
The funds can be used for a variety of business purposes such as purchasing stock, expanding your team, or managing seasonal expenses.
The Drawbacks to Consider
While unsecured business loans can be convenient, they also have some limitations to keep in mind.
- Higher interest rates: Because the lender takes on more risk, the cost of borrowing is usually higher.
- Shorter repayment terms: You may have less time to repay the loan compared to secured finance.
- Smaller loan amounts: Most lenders limit unsecured loans to lower sums than secured options.
- Stricter eligibility criteria: Lenders often require a solid trading history and good credit score.
How Much Can You Borrow?
Loan amounts for unsecured business finance usually range from around £1,000 to £500,000, depending on the lender and your financial profile. Some lenders may offer more if your business demonstrates consistent revenue and profitability.
The more stable your cash flow and the stronger your credit profile, the better your chances of securing favourable terms.
Unsecured vs Secured Business Loans
Understanding the key differences between unsecured and secured loans helps you decide which is best for your situation.
Unsecured loans rely on your creditworthiness rather than collateral. They’re typically faster to arrange, ideal for short-term needs, and better suited for smaller amounts.
Secured loans, on the other hand, are backed by assets such as property or equipment. They usually come with lower interest rates and longer repayment periods but take longer to process.
If you want to protect your assets or need funding quickly, an unsecured business loan may be the better choice. If you need a larger loan amount or have valuable assets available, a secured loan may offer better rates.
Who Can Get an Unsecured Business Loan?
Eligibility criteria vary between lenders, but generally, you’ll need to show:
- At least three to six months of trading history
- A consistent annual turnover
- Good credit history and responsible borrowing record
Lenders also prefer businesses with a solid plan for how the loan will be used.
Conclusion
An unsecured business loan can provide the financial boost your business needs to grow, manage short-term challenges, or invest in new opportunities, all without putting your assets at risk.
The key is finding the right lender and the right terms. You may have a relationship with your current bank that supplies your business account, however you may wish to look for alternative lenders.
If you’re considering an unsecured business loan, contact Kerr & Watson today for advice.
