Unsecured Business Loans

Unsecured business loans can be a fast and simple way to get money for your business even if your business doesn’t own any valuable assets or collateral. Here, we’ll discuss:


NB: If you need a small unsecured loan for your business which you are willing to borrow under your personal record instead of your business’, you can apply for a personal loan with Cashfloat! Here, we offer unsecured loans between £1,000 and £2,500 over 6 or 9 months. However, keep in mind that with a personal loan,you and not your business will be responsible for repaying the loan


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Unsecured Business Loans vs Secured

Both unsecured business loans and secured business loans have their advantages and disadvantages. Ultimately, the loan you choose depends on how much you need to borrow and what type of business you run.

Warning: When looking for a small business loan provider, keep in mind that only lenders who offer loans to limited companies need to be regulated! As a result, some lenders who only provide loans to sole traders may be unregulated! So, if you’re a sole trader, we recommend that you only borrow from a regulated lender for your own safety.


Unsecured Business loans pros: Unsecured Business loans cons:
  • No risk of losing any assets or collateral
  • Massive variety of lenders to choose from
  • Fully online process
  • You can only borrow up to £50,000
  • More expensive than secured loans
  • Need to have a fair or excellent credit score
Secured Business loans pros: Secured Business loans cons:
  • Cheaper than unsecured business loans
  • You can borrow up to £1 million
  • Bad credit accepted if you can provide collateral to the value of the loan
  • Risk of the lender seizing assets in case of non-payment
  • An in-person meeting is usually required
  • Only offered by small amount of companies
  • Lots of paperwork involved
  • Longer processing time

When should I borrow an unsecured business loan?

There are times when an unsecured business loan could be just the thing your business needs. For example:

  • Expansion– If you’ve built a successful business model and want to expand, a business loan can help accelerate your growth.
  • Overcome short-term money problems – If you need to solve a cash flow problem that you know is temporary, a business loan could be the perfect way to bridge the gap quickly and affordably.
  • Refurbishing – If you own an already-successful business, and renovating the premises will most likely boost your success, a business loan could be the perfect way to get that lump sum you need fast.
  • Cover a large one-time purchase – Even successful businesses don’t always have the money to pay for a large one-time purchase. As long as business is going well, a business loan can be a sensible solution.

However, whatever you choose to use the loan for, always try to borrow over the shortest period possible to keep the loan costs low. Of course, if your business has not been doing well for a while and a loan will only barely keep you afloat, borrowing more may not be a smart choice.

What do you need to borrow a business loan?

Borrowing from a bank

Gerneally, borrowing an unsecured business loan from a bank will require you to have:

  • A business bank account with them;
  • An impeccable credit record;
  • Been trading for at least two years.

Borrowing from a non-bank lender

In the event that you’re struggling to get a business loan from your bank, you can apply online with an unsecured business loan lender. Some factors that may affect your business loan’s interest rate are:

  • The amount you’re borrowing
  • How long you’re borrowing for
  • If there is a personal guarantee or not
  • How your business is performing
  • How long your business has been trading for
  • Whether your business has good credit or not
  • What sector your business operates in

Whether you choose to borrow from a bank or a private lender, make sure you read the agreement carefully, so you know exactly how much the loan will cost! For example, some lenders charge a fixed interest rate, while others charge a variable rate (which means it can fluctuate during the life of the loan).


Unsecured Business Loan Rates

Below is a table comparing the top unsecured business loans in the UK. However, keep in mind that the interest rate is ‘representative’, meaning your rate could be higher or lower depending on your circumstances.

The length of the loan will also impact the amount you pay back. With a short term loan, you’ll find that repayments are higher, but you pay less interest overall. On the other hand, with a long-term loan, your repayments will be lower but you’ll pay back more interest in total. Most importantly, when deciding how long you need to repay your loan, be realistic about what you can afford to pay each month.


Company Type Loan amounts Loan Duration RAPR

Lloyds

Bank

£1,000 to £50,000

1 – 10 years

5.1%

HSBC

Bank

£1,000 – £25,000

12 months – 10 years

7.1%

Santander

Bank

£2,000 up to £25,000

1 – 5 years

7.9%

Barclays

Bank

£1,000 – £25,000

12 – 120 months

7.9%

Funding Options

Online Lender

1 month – 5 years

£10,000 (annual)

8.15%

Esme Loans

Online Lender

£10,000 to £250,000

1 – 5 years

8.73%

Natwest

Bank

£1,000 – £50,000

1 – 10 years

9.78%

Fleximise

Online Lender

£5,000 and £500,000

1 – 48 months

43.1%

iwoca

Online Lender

£1,000 – £200,000

1 – 12 months

49%

Unsecured Business Loans FAQs

What’s a personal guarantee for an unsecured business loan?

A personal guarantee is when the lender requires a company director to sign a contract stating that he/she will personally pay back the loan if the business fails to do so. In other words, the director is acting as a guarantor for the business loan.

Some lenders will offer unsecured business loans, but still require a personal guarantee. Usually, unsecured business loans with a personal guarantee will have the advantage of a lower interest rate. Still, keep in mind that the director signing the guarantee will likely be credit-checked first to make sure they are a reliable guarantor for the business.

Can I borrow an unsecured business loan with no credit check?

Lenders use credit checks to determine the interest rate they will offer you. So, if the lender thinks that lending to your business is low risk (because your company has good credit), they’re likely to provide you with a lower interest rate. But, if they think that lending to your business is high risk (because your business has bad credit), they’re more likely to offer you a high interest rate.

Of course, even if you’re eligible for a bad credit unsecured business loan, you will not be approved if you fail the lender’s affordability assessments. Also, keep in mind that business with bad credit can improve their credit rating by repaying a business loan in time.

Am I eligible for an unsecured business loan?

To apply for an unsecured business loan, you need to be:

– A limited company (LTD), a Limited Liability Partnership (LLP) or a Sole Trader
– A UK-based business
– Trading for at least three months

Some business loan lenders (especially banks) require you to have a business bank account, and may not approve a loan via a personal bank account. In addition, you do not need to be the business owner to apply for an unsecured business loan. Any registered company director can make the application.

What do unsecured business loan lenders check?

Lenders might carry out:

– A credit check on the business
– Know Your Customer (KYC) checks
– A review of your HMRC self-assessment tax return
– Anti Money Laundering (AML) checks


What is an unsecured business loan?

An unsecured business loan is a loan you can borrow for your business that is not secured against any collateral or assets. For small businesses that do not have any assets that they can use as collateral, this is a popular way to secure funding.

What is a secured business loan?

Unlike unsecured loans, secured loans require you to sign off an asset as security for the lender. An asset can be any valuable commodity that your business owns. For example, hard assets – like property, equipment or vehicles – or soft assets, like stock. So, if your company has access to valuable assets that you can offer to the lender as security, you might prefer to use a secured loan as it will come at a much cheaper interest rate.


However, keep in mind that secured lenders will often ask to carry out a valuation of the asset. Consequently, they will only lend you an amount that is equal to or higher than the value of the asset. Then, once you’ve borrowed the loan, the asset is considered under their legal authority until the company pays the debt off. Of course, if you don’t pay the loan, you risk losing your assets.


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