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Do unsecured business loans exist?

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How to get an unsecured business loan

These days it can be very difficult to obtain a small business loan. For the last few years - well before the volatility caused by Brexit - banks have become increasingly cautious about lending. They often require security for a loan, making an unsecured business loan hard to find.

Secured and unsecured business loans are two very different products and it is important to be clear about those differences.

Secured

A secured business loan is a credit agreement that uses assets as security e.g. your property as security. It can appear to be an attractive option financially if you are a homeowner and need to borrow a substantial amount - usually from around £5,000 to £125,000. The repayment terms tend to be over a several year period and interest rates lower due to assets available as security, therefore the loan repayments can be quite low. However, you need to be very clear that because the loan is secured on the asset that there is a potential risk of you losing the asset in the event of missing payments.

Unsecured

An unsecured business loan is available to everyone: you do not need to have assets to secure it. These loans can be available from banks and other lenders such as online companies. Unsecured business loans usually have fixed repayments over a period of between one and five years, with a higher interest rate for shorter-term loans. If you are unable to make payments the lender will contact you to make arrangements for this to happen but because the loan is not secured on your assets, these are not under threat.

However, it is because the lender has no security to underpin the loan that many lenders are reluctant to agree to an unsecured business loan. Those that are willing to consider them usually base their lending decisions on rigid algorithms of what constitutes a good risk. These algorithms do not take into account any extenuating circumstances or other factors, so you are likely to struggle to get an unsecured business loan from a mainstream lender if there are any issues with your credit score.

This is where alternative lenders such as Fair Business Loans can help! We offer unsecured business loans as follows:

  • If we lend to you as an individual or as a sole trader then NO security is required.
  • If you need us to lend to a partnership or limited company, then a personal guarantee will be required from one or more of the directors/owners. Such a guarantee is a written promise from that individual guaranteeing payment on the loan in the event the business does not pay; it is unsecured so is not tied to a specific asset.

We can offer unsecured business loans of between £2000 and £20000 to small businesses that have been operating for at least 24 months. You will find our approach refreshingly different:

  • most business types/sectors considered
  • loan decision based on individual assessment not algorithms or credit scores
  • flexible repayment terms
  • transparent and affordable charges and rates
  • dedicated relationship manager

Why not contact us today to see if we can provide the unsecured business loan that you have been searching for?

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