What are unsecured business loans?
There’s a higher risk involved in unsecured business loans – the borrower might not be able to repay the loan back in full – therefore, there’s higher interest rate. It’s down to the borrower to prove through detailed cash flow analysis that they can afford to pay back the money through regular monthly payments, plus interest, during the loan period.
Why are unsecured business loans chosen by borrowers?
Borrowing money with no asset as collateral means that there is no risk to your home, vehicle or other long-term assets that you may have otherwise tied into the loan. Companies with limited assets can apply for unsecured business loans providing that they have good financial history, though in some situations, directors of the company may have to sign personal guarantees.
The loan period is typically a lot shorter than a secured, meaning that businesses can secure significant funding quickly. It’s a similar style to a personal payday loan.
Interest can vary based on repayment timeframe.
What happens if I can’t pay the money back?
With no asset to fall back on as collateral, a lender can resort to debt collection. Borrowers in tenuous positions may have to apply for bankruptcy.
This is why the credit checks on the borrower’s financial status are as thorough as they are. At FC Funding, our team of lending experts will painstakingly assess all applications; there’s no need to document all your assets in an unsecure business loan, so the loan underwriting process is easier in some circumstances.
If you would like to discuss your options and want a free quotation please call us on 01202 937880.
Here at 1st Commercial Funding we are your one stop shop for all of your commercial finance and commercial mortgage requirements, from commercial mortgages on B&B's through to invoice financing for your manufacturing business. We are here to assist with applications to lenders and provide our clients with the right solutions for their specific needs to help grow/expand their business.