What Exactly Is An Unsecured Business Loan?
With so much technical jargon surrounding money and business, its not surprising that certain terms get misinterpreted and misunderstood. An unsecured business loan is a loan offered by a bank or lending institution, such as NGI Finance, to a business.
In regards to unsecured business loans the borrowing business isn’t required to place any personal or business assets as collateral on the loan, which can make it a more viable option for many.
What’s The Difference Between An Unsecured Business Loan And A Secured Business Loan?
In terms of unsecured business loans, the interest rate and repayments are fixed for the life of the loan. As mentioned above, unsecured business loans are not fixed to a borrower’s assets whereas secured business loans rely on them.
However, unsecured business loan interest rates have a tendency to be slightly higher than those of a secured loan’s as the lender’s option for recourse against the borrower in event of default are limited.
Why Should I Choose An Unsecured Business Loan?
There are many reasons you may want to take out a loan as a business, and unsecured business loans can give you a great deal of autonomy. For example, you can use it to consolidate debts into one possibly less expensive loan with no charge created on your business assets.
You will also have the freedom to sell your business assets if necessary as no loan will be attached to them. Since the recent economic conditions have led to banks being less willing to lend money, professional lending companies such as NGI Finance are becoming a simpler and more cost effective option.
It may be the case that you are under unreasonable pressure from your bank and need to use the loan to pay off or take out an overdraft. Whatever the reason, unsecured business loans are easy to obtain and have minimal risk in comparison to its secured substitute. This is because your business doesn’t need to supply collateral, whereas if your business defaults on a secured loan the lender can seize any of your business’ property.
Finally, in the unlikely event that your company files for bankruptcy the court is more likely to discharge unsecured loans but won’t typically do the same for secured ones.
Is My Company Eligible For An Unsecured Business Loan?
Applications for unsecured business loans are primarily based on your business and personal credit rating, your financial status and the amount that you would like to borrow. When deciding whether or not you are eligible for a loan, the lender will assess how much of a risk is involved in offering you money. This level of risk will then be reflected in the rate of interest within the terms and condition of your unsecured business loan.
Every professional lender has their own regulations. For example, NGI Finance can consider you for an unsecured business loan as long as your company has been trading for over two years and you can provide two years worth of filed and formal accounts.
How Much Can I Borrow And How Can I Use It?
NGI Finance offer unsecured business loans for between £5,000 and £150,000 with rates starting from 8% APR which enables you to pay off your existing overdraft or invest in your business.
Unsecured business loans can be used for anything related to your business but typically they are used for launching new marketing campaigns, buying new business software, building new websites, purchasing stock, carrying out expansion plans, supporting the working capital, supporting cash flow and reducing your bank’s overdraft.