Too often, businesses are prevented from achieving their financial aims due to a lack of ‘securities’. These can be put up for a lender as collateral if you miss repayments. A vehicle, property or large-scale equipment range are among the most common assets.
Yet many brands don’t have them. When you need cash quickly, that can be a real issue. Look beyond the mainstream, though, and you’ll find that unsecured loans are waiting to leave their mark.
What are they? Who are they suitable for? And how might you apply for one? We answer all of the key questions below…
Defining an unsecured loan
The clue’s in the name – this type of loan doesn’t require any collateral whatsoever. Instead, it’s based entirely on your credit history and how much the company is earning. Anyone can apply for an unsecured loan; startups, for instance, may find it a more open route to funds as they don’t have many assets to speak of just yet.
With the shift in focus, you must know this: the interest rates are higher than they’d be for a secured application. That’s because the lender needs to balance the added risk, and a higher percentage is the way to do so.
Terms and conditions apply, the same as secured lending. You’ll be asked to pay to an agreed timescale over several months or years. The only differences are the ease of access and the slight bump in interest.
What can this loan type cover?
There are several main purposes for an unsecured loan. Companies tend to use them as a fast, moderate financial aid – something they can inject into the business and pay back with little difficulty. The lender will ensure you have the means to stick to their debt timetable. Once everything’s approved, you’re good to go.
Here are some examples of unsecured loans in action:
- Paying a VAT bill. If VAT runs beyond what you’ve saved for, alternative loans can fill the gap until you can cover the cost incrementally.
- Cash flow issues such as a dip in sales, high overheads or an increased payroll.
- Investment in R&D and materials. A large share of businesses require help when they’re developing tech, or buying raw goods and equipment.
- Paying Corporation Tax, similar to the VAT conundrum.
- Acquisitions that will pay off eventually, but are beyond your funds at the current time.
Are they simple to achieve?
As long as you have an alternative finance expert to hand, unsecured loans can be granted within days or weeks. At Johnson Reed, for example, we’ve guided countless people to a loan they need, irrespective of their lack of collateral. Our lenders specialise in this area, and unsecured loans are massively popular – they have almost endless potential.
It could be the fast cash boost you’ve been waiting for, even if you didn’t know it… Contact Johnson Reed for a clearer view of your unsecured, alternative financing. We may just surprise you even further.