Small business owners must be flexible when it comes to finding the funding they need. If you don’t own a lot of assets, need finance quickly, or prefer not to offer security, your options might seem limited. However, unsecured business loans might just offer the solution you’re looking for.
Unsecured business loan, also known as unsecured business finance, provides a business with access to capital quickly with no requirement for physical security. This means if you are a new business or a trading business without the ability to pledge any security other than a Personal Guarantee or Debenture, this is the type of loan that your business can obtain. Unsecured Business Loans are almost always quicker than traditional secured loans, as there is not legal process of placing a charge over a property. Instead, lenders will put more importance on your trading and business history, and may require a personal guarantee, as well. There are several different types of unsecured business loans, including small and large unsecured business loans, as well as short- and long-term unsecured business loans.
The overall cost of your unsecured business loan will largely depend on the lender and more importantly a lender that your business meets the eligibility criteria for. Overall, unsecured business loan rates are higher than traditional secure loans simply because the lender takes on a higher risk when they approve of one. We will, of course, go deeper into the specific interest rates of different unsecured loan providers and what fees and costs you need to consider later below. In general, expect higher overall costs than secured loans but quick decision times and a lot of scrutiny around your businesses financial health to ensure the business can repay the business loan.
In general, the application process for unsecured business lending can be relatively quick. There’s no need for valuations when it comes to your assets, after all, and the legal process is more straightforward than traditional loans. In some cases, applications can be approved in as little as 24 hours.
Since unsecured business loans come with no assets to offer the lender, they’re taking on taking a lot more risk than traditional lenders. As such, they will look much more deeply into your company and financial history to ensure that they have some level of assurance that you can pay it back. Here are some of the common eligibility criteria worth considering:
• Credit score: You can get some unsecured business loans with bad credit or no credit, though you will end up paying more for it in general. Usually, however, you need a reasonable personal credit score and if you’re already in business, you must give a credit report for the company, as well.
• Business age: Most unsecured business loan lenders will require that your business has been established for at least a year.
• Revenue: Though this changes from lender to lender, many will require an average annual revenue of somewhere between £50,000 and £150,000.
• Debt-to-credit ratio: Too much personal credit can be considered a risk by some lenders.
• Net operating income: To ensure that you’re able to handle the repayments of the loan, lenders tend to look for total income that’s 1.25x the total expenses of the business.
• How you intend to use the fund: Not all, but some unsecured loan providers will want to know how you plan to use the money to ensure you will be able to return their investment.
• Personal guarantee: There are unsecured business loans with no personal guarantee available, but most of them will request this.
Eligibility Criteria for apply for an Unsecured Business Loan.
For unsecured business funding, you will need to supply more information than you normally might for other small business loans or cash advances. This can include the following:
• Personal information for the applicant or director of the business
• Business information, including company number, name, and registered or trading address
• 6-12 months bank statements
• Most recent filed annual accounts for one to two years
• VAT returns for at least the last 4 quarters
• Management information to date
• Aged debtor and creditor reports
• Cash flow forecast for at least a year ahead
• KYC and AML checks
• A business plan may be required by some, but not all
Unsecured business loan costs are typically associated with an APR which is the interest rate applied annually and arrangement fees based on a percentage of the loan. Some companies may have late repayment or early repayment fees, but these differ from provider to provider and will be made to clear to you in the form of an Approval in Principal document before you formally enter a loan agreement.
There may also be security documentation costs, costs for independent legal advice, costs for debenture required for the company. Interest costs can vary widely from as low as 10% to 40% APR depending on the risk profile of the business. Many unsecured loan lenders do offer fixed interest rates.
Fast unsecured business loans are common with a quick application process and approval times. For the delivery of your funds, it can take a little longer, sometimes up to four days or a week, but this still makes them much quicker than some of the other options on the market.
For short term business finance that’s unsecured, VAT loans are another options worth considering. These are loans specifically for paying taxes, allowing you to be prepare for other impending payments. VAT loans have an extremely short time frame from application to approval, often taking as little as 3-5 days. Eligibility and the information you need is roughly the same as for any other unsecured business loan. They offer flexible repayment terms, faster payment transfer and are quick and simple to arrange compared to others.
Now, it’s time to take a closer look at the top 6 providers of unsecured business loans. We will take a closer look at the unsecured business loans available, the application process, approval time, loan terms, and other factors that help these providers stand out from the rest. Which is best for you will likely depend largely on what you want to use it for, whether you need unsecured business acquisition loans, scaling loans, financing for equipment, paying your taxes or something else.
For an unsecured business loan, here’s a few reasons why you should consider Merchant Money:
• Get up to £150,000 within 24 hours to grow your business without offering up assets
• Only pay interest until the day you settle, with no hidden charges or fees
• Merchant Money approve 90% of applicants
• Top-ups are available if you make repayments on time and your business continues to perform
• Trusted by independent customer reviews
If you’re looking for a fast and accessible source of finance for your business, an Unsecured Business Loan from Merchant Money could be just what you need to keep growing.
For an unsecured business loan, here’s a few reasons why you should consider Funding Circle:
• Funding Circle unsecured loans are on offer from £10,000 to £500,000, amongst the larger ranges available in this specific type of loan.
• They have loan terms of six months to five years with fixed interest rates that can be as low as 1.9% a year, open to businesses of all sizes.
• A simple application process and decisions that can be made as soon as five hours and funding is usually delivered within 24 hours with zero early repayment fees.
Though a relatively new lender in the sphere, Funding Circle are already highly regarded and well-reviewed.
For an unsecured business loan, here’s a few reasons why you should consider Fleximize:
• Fleximize provides loans for £5,000 to £500,000 for up to 2 years.
• Businesses that are more established can borrow even more, and the funding can be transferred to a bank account in as little as 48 hours.
• Top level service is a unique benefit of Fleximize, with a dedicated relationship manager available to every customer
• Top-ups and repayment holidays available to makes loans more flexible. As with many other unsecured loan providers, there are no penalties for early repayments.
For an unsecured business loan, here’s a few reasons why you should consider Spotcap:
• A business financial services provider in the UK, Europe, and Australia, Spotcap is a better fit for businesses that want to borrow a little less.
• Their unsecured loans are available for any amount up to £250,000 with flexible payment terms available, with loans repayable from as little as one month up to two years.
• Their online application takes only minutes and decisions are normally made over one working day.
• Their eligibility criteria are transparently presented, too, with requirements that borrowers have been in operation for at least three years and have a minimum turnover of £500,000 or over.
For an unsecured business loan, here’s a few reasons why you should consider Boost Capital:
• A winner of the Business Moneyfacts 2019 Award for Best Service from an Alternative Funding Provider, Boost Capital has unsecured loans ranging from £3,000 – £500,000.
• Applications can be made online or over the phone, are usually approved within 24 hours and funding can be delivered in as little as two business days.
• Personal guarantees and credit checks are required, businesses must have been trading for three years or more and must have an annual turnover of a minimum of £70,000.
• They do state that bad credit does not necessarily mean an unsuccessful application, since they look more closely at the financial details.
For an unsecured business loan, here’s a few reasons why you should consider Sellers Funding:
• A lender that offers unsecured loans to a specific market, namely those who sell from an Amazon account.
• These short-term loans can be anything from £5,000 to £500,000, with terms lasting from 6 months to one year.
• They’re a competitive lender that uses your Amazon sales data to offer loans that can be more affordable than some of the other providers.
• To be eligible, you have over 6 months of Amazon sales history, over £30,000 in sales over the past six months, as well as positive feedback, few returns, and a consistent sales record.
For an unsecured business loan, here’s a few reasons why you should consider White Oak:
• As an alternate finance provider, White Oak offer £2,000 to £500,000 loans for terms of 3 to 12 months.
• They offer a highly straightforward application and fast turnaround with as little as 24 hours.
• Fees and charges are minimal, with interest only loans available in certain cases.
• A highly accessible lender, accepting 4 out of 5 applications.
Their loans can be used for VAT payments, corporation tax, income tax, working capital, and a host of other applications, allowing borrowers to free up their capital and ensure their cash flow remains smooth when tax season is approaching.
For an unsecured business loan, here’s a few reasons why you should consider iwoca:
• Offering quick access to finance, iwoca has application forms that can take only minutes to fill out, and loans can be approved within 48 hours and sometimes instantly.
• Unsecured business loans that are available for up to 12 months, with no hidden fees.
• Interest rates can vary, but they have a loan calculator and eligibility checker that can help you get a more transparent look at the kind of deal you can expect from them, with rates starting at 2% a month.
Iwoca business loans are also highly flexible, with no fees for repaying early, so you can pay as soon as you like, and the ability to top up on your loan, as well. Furthermore, there’s no minimum turnover required to apply.
For an unsecured business loan, here’s a few reasons why you should consider ESME Loans:
• ESME offers some of the most flexible lending available with the minimum annual turnover of £15,000.
• You could be approved for loans as low as £10,000 and as high £250,000 for highly flexible terms of a year up to 5 years.
• The loans come with a fixed interest rate, and there are no early repayment fees. They have an eligibility tracker on the website, so getting started is simple.
With the above information and comparisons of the best unsecured business loans, hopefully you should understand how and why to apply for one, as well as which options are worth considering. Whether you need an unsecured loan to buy a business, to aim at scaling, or simply to beef up your cash flow, these are the best providers on the market.
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