Finance Guide: Unsecured Loans22nd October 2015
Unsecured loans are loans that are not backed by any kind of collateral – property or physical assets, for example. They can be a good choice for businesses that don’t require many assets like machinery or vehicles, online businesses that don’t have any property, or any business that simply doesn’t want to put up any security.
Because they pose a higher risk for the lending institution, unsecured loans often come with higher interest and lower approval rates than secured loans, though, as always, this will depend on a business’ individual circumstances. Maximum loan sizes are typically smaller than secured loan sizes, because placing a lower cap on the amount available is another way for lending institutions to mitigate their risk.
As another way to reduce risk, lenders may ask for a personal guarantee from a director of the company. This is a big commitment, but it can give the business access to larger amounts of funding than unsecured loans usually offer.
Because unsecured loans aren’t tied to any collateral, the business won’t run the risk of losing a home or essential equipment if they can’t make the repayments. Some businesses may see this as an advantage, and worth the higher interest rates.
Making sure you have the right finance for your business is complex and can often be confusing.
There are so many options that can seem very similar, but which when reviewed closely can be very different in terms of monthly payments, overall costs, up-front fees and terms and conditions.
If you’d like to talk to one of our Business Finance Specialists:
Call us on 020 3637 2455
Or email us on [email protected]
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