Unsecured Funding for Business
Posted on 20th May 2020 at 12:31
What exactly is unsecured funding, and does my business qualify? Read on for easy answers to tricky questions.
Just when you thought you had a handle on your business, a global pandemic comes along and turns the global economy upside-down. Yes, the current situation has affected millions of small businesses, but you’re not ‘everyone’ and you still need to keep your business afloat and your family fed.
Perhaps you’ve looked into various options to keep your chin above water until things settle down a little, and if so, then you’ve no doubt come across some information on unsecured funding for businesses.
It can be a bit of a rabbit hole though, don’t you agree?
We’d like to offer simple answers to the most commonly asked questions around unsecured business loans so you can ascertain whether this course is right for you.
Common Questions on Unsecured Funding
The UK government has made funds available for distressed companies in this torrid time, notably those impacted by COVID-19. Let’s find out what this is all about.
What is an unsecured business loan?
An unsecured business loan is one which does not require security to qualify. In most cases, a business loan requires that you offer security in the form of tangible business assets (i.e., invoices, property, machinery, etc) or your personal assets.
An unsecured loan is exactly that; one which does not require security to qualify. Essentially, the lender carries the risk in this transaction.
Unsecured loans are available from £1,000 to £350,000 and are normally backed up by a businesses’ trading position. As an example, some lenders specify the loan amount as a multiple of turnover which allows them to make a fair estimate on your businesses’ future based on the recent past.
Why choose unsecured funding?
There are numerous benefits to unsecured funding which include:
Fast turnaround. Your loan can be approved in a matter of hours.
No assets required. Without needing to secure the loan amount against assets, newer companies or those with few assets may prefer this option. Because of this, business owners don’t need to call on their solicitor to put a charge on assets which saves more time.
Lower upfront costs, and in some cases, none at all.
Flexible repayment options.
How can unsecured business loans be utilised?
It makes good business sense to keep a close eye on company costs. For example, using an unsecured loan to consolidate more expensive loans is a simple and sensible way to reduce costs.
Some small businesses make use of this vehicle on a short-term basis to buy stock to accommodate seasonal trading peaks.
Perhaps you’re planning on investing in updated equipment or software, or you’re considering expanding into a new market to future-proof your earnings?
Of course, in this uncertain time, we may simply need some cash to carry the salaries or office rental until we can trade again.
How does it work? Do I qualify?
The requirements are reasonably straightforward.
Your business needs to be at least 6 months old, although some lenders insist on a minimum period of 2 years.
Loans are available to UK Limited companies.
You will need to supply the following documentation:
Your last set of filed accounts
3 – 6 months’ bank statements
YTD profit and loss
The funder may request a Personal Guarantee from the Directors in some cases.
Do you not meet these criteria?
If this is the case, then please get in contact with us anyway. There are circumstances where certain concessions can be made, and a frank conversation may unlock another way forward for you.
The world of lending may seem muddy at times, with too much small print and too little information.
Whilst we are in a changeable financial situation, we may be reticent to take on further responsibilities, and yet another outgoing may feel counterproductive.
Whatever your feelings on this matter, we know that you will be far more comfortable having all the facts at your disposal. So please, get in touch with us and let our team offer some advice on unsecured funding in this troubled time.
Tagged as: unsecured funding
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