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Unsecured loans and secured loans are both valuable forms of funding that support business cash flow and long-term growth. They are fundamentally different financial products, however, and some businesses find that unsecured loans are better for their needs.
It’s important to understand the implications of each type of borrowing, and our experts at UK Business Finance can talk you through the pros and cons of each. We understand the requirements of all lenders in the UK and will guide you towards the best deals regardless of the type of finance.
Unsecured loans can offer several important advantages over secured loans and may be the type of funding that your business needs to grow. They’re uncomplicated, flexible, and quick to access, so let’s look at these elements and advantages in more detail.
No collateral required
If your business doesn’t own many assets, an unsecured loan can be a good option. If this is the case, the lender will sanction a loan based on other criteria, such as your trading and business credit history. Not owning assets isn’t a negative factor when looking for funding, especially if you can rely on a previous record of good financial management.
Quick to obtain
Unsecured loans can be obtained quickly when compared with secured loans. This is because the asset put forward on a secured loan needs to be professionally valued before the lending can be agreed upon.
In comparison, unsecured lending requires less paperwork to be provided and the lender uses other methods to decide whether to sanction a loan. These include checking your credit file and business books for evidence of good financial health and management.
Flexibility
You can use an unsecured commercial loan for a variety of purposes as long as they’re related to your business. These might include buying stock, for example, paying off debt, or stabilising cash flow so the business can operate with more certainty on a day-to-day basis.
They also offer flexibility in terms of repayment – they tend to be repaid over the short to medium term and there’s generally no penalty for repaying early if this suits your circumstances. Some lenders also allow overpayments so you can repay the loan faster.
The typical criteria that you’ll need to meet to be eligible for an unsecured commercial loan are as follows:
UK Business Finance can help you find the right loan for your needs. We provide our services free-of-charge to clients and search the whole of the market for the best deals. Please contact one of the team for more information on how we can help.
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
What can company finance be used for?
Business finance can be used for a multitude of purposes within a company, from boosting general cash flow to funding development projects and buying stock. Its flexibility and adaptability to an individual business’s needs make it ideal whatever stage of business you’re at.
Management buy-in financing options
If you’re considering being part of a management buy-in (MBI) or you’ve decided to sell your own business to an incoming management team, there are several ways in which the transaction can be financed.
Can I get business finance if my company is insolvent?
If your company is insolvent, it’s vital to stop trading straight away and obtain assistance from a licensed insolvency practitioner. The insolvency practitioner’s role at this point is to assess your company’s financial situation so that they can provide guidance on whether additional finance is appropriate.
Can’t pay company bridging loan – what are my options?
A bridging loan is a form of short-term finance that lasts for up to 12 months. It provides vital funding between transactions when a company purchases one property before the sale of another has been completed.