What is an unsecured business loan?
An unsecured business loan is funding that usually requires a personal guarantee from the lender. The benefit of an unsecured business loan is that it does not involve any personal or business asset as security. Unsecured loans usually require the borrower to show the lender various credentials such as financial history, cash flow forecast, and credit rating.
What is a personal guarantee?
A personal guarantee is a written promise from the business owner that guarantees to pay off the loan if their business fails to pay.
Benefits of an unsecured loan
- Due to there being no collateral involved (personal or business assets) it is ideal for smaller businesses that would not be accepted for a secured loan due to the lack of high-value assets.
- This type of funding solution is usually a quicker and easier option in order to obtain finance, ideal for a business that needs finance quickly.
Limitations of an unsecured loan
- There are higher interest rates involved with this type of loan due to the risk involved.
- A lender will put a limit on how much they are willing to lend, which could be up to £200,000 or in some cases £500,000. If a higher amount is required a secured loan may be a better option.
- Unsecured business loans are based on whether or not the business can make repayments, so factors such as monthly or yearly turnover will be a point of focus on a decision.
An online based one stop shop for all lighting requirements. Established in 2006 they are a serious competitor within the industry and are constantly growing. They sell high-quality luxury outdoor lights, wall lights, bathroom lights, ceiling lights, floor, and table lamps, as well as chandeliers. Also offering one to one help with designing one-off lights from scratch.
With the success of the company they decided it was time to do a refurbishment on their online shop to try and appeal to more customers. Unsure on what was the best loan option to take they approached us looking for advice. One of our experts reviewed their application and decided the best option was an unsecured loan.
Benefits of taking an unsecured loan
- You are not required to put up any assets within the business as collateral.
- Obtain the funding quickly as this type of funding solution is usually a quicker and easier option in order to obtain finance. Ideal for a business that needs finance quickly.
Once the loan was approved and was with the client, they were able to refurbish their store without taking any impact on their cash flow. The refurbishment was successful as it attracted more customers which resulted in a 15% increase in sales.
If an unsecured business loan appears to be a good option for your business, why don’t you see your eligibility by completing your loan journey below for a result in a matter of minutes!
Or if you think that this may not be the best path for your business click here to see other options you may be eligible for.