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What are unsecured business loans?

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Unsecured loans are available from a variety of different lenders, including traditional and alternative providers. Due to the nature of the loan, they could be set up much faster than medium or long-term loans. However, this might vary depending on the lender or complexity of the case.

What are unsecured business loans?

A business must first submit an application to a lender, which will include information on their current business and finances. The lender will then evaluate the application to check the financial stability of the business and the risk of lending. If approved, the business will get access to the funds, nowadays often via a personalised online dashboard. The business will pay back the amount given over a set period, in addition to the lender’s charges and interest.

Why do businesses need an unsecured loan?

Unsecured loans are an important part of the financing mix and are used by businesses to grow or pursue opportunities. With quick application processes and fast turnarounds, many lenders offer attractive solutions. Reasons you might seek an unsecured loan include:

  • Managing cash flow
  • Purchasing inventory or equipment
  • Bridging receivables
  • Remodeling and renovation
  • Hiring staff

How can you use an unsecured business loan?

Many businesses seek unsecured loans to ensure that they can focus on day-to-day business operations instead of spending too much time working on finance. Reasons you might seek an unsecured loan include:

Business Loans

Pros of Unsecured Business Loans

  • No collateral
    This is the largest advantage, as many businesses have already provided collateral for a secured loan. Unsecured loans without collateral therefore often work well as a top-up in a business’ overall finance mix.
  • Straight-forward application process
    Unsecured loans do not need assets to be itemised and evaluated and therefore the application is more straight-forward and can to a larger extent be done online
  • Speed
    As asset valuations are not necessary, the application, as well as the loan approval process, is often considerably faster than the process for an asset-based loan
  • Less up-front cost
    As the process of applying for an unsecured loan is straightforward and simple, there tends to be little to no upfront costs for an application.

Cons of Unsecured Business Loans

  • Higher interest rates
    As the lender is taking over risk from the business, unsecured business loans typically have higher interest rates.
  • Not suitable for starters
    As an unsecured loan is not based on assets, your company credit needs to be strong, and you need

The Pros and Cons of Unsecured Business Loans

Pros of Unsecured Business Loans

  • No collateral
    This is the largest advantage, as many businesses have already provided collateral for a secured loan. Unsecured loans without collateral therefore often work well as a top-up in a business’ overall finance mix.

 

  • Straight-forward application process
    Unsecured loans do not need assets to be itemised and evaluated and therefore the application is more straight-forward and can to a larger extent be done online

 

  • Speed
    As asset valuations are not necessary, the application, as well as the loan approval process, is often considerably faster than the process for an asset-based loan
  • Less up-front cost
    As the process of applying for an unsecured loan is straightforward and simple, there tends to be little to no upfront costs for an application.

Cons of Unsecured Business Loans

  • Higher interest rates
    As the lender is taking over risk from the business, unsecured business loans typically have higher interest rates.
  • Not suitable for starters
    As an unsecured loan is not based on assets, your company credit needs to be strong, and you need to prove that the business is financially stable and profitable. This means well-established businesses with a longer cashflow history are more likely to successfully apply for an unsecured loan than start-up companies with a limited track-record.
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20:46 15 Oct 19
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Helped me understand a lot of things that weren’t made clear in school. They patiently taught me maths and made me more feel more confident when sitting exams. I definitely recommend.
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15:22 15 Aug 19
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FAQ

What business loan types are available What business loan types are available?

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What business loan types are available What business loan types are available?

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What business loan types are available What business loan types are available?

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