You may have heard lenders talk about the ‘security’ required for business loans, or the terminology ‘secured’ and ‘unsecured lending’, but what does this mean for your business?
In simple terms, if you take out a secured business loan, it means the loan is backed up by some type of security such as the assets that your business owns (property, machinery, invoices etc).
On the other hand, unsecured business loans don’t have any security or assets backing them up and for the lender no guarantee of getting their money back. Unsecured business loans usually come with a higher rate of interest to compensate for this risk. Normally lenders will look at your business’ trading position and turnover to determine how much they are prepared to lend. They will also perform background and credit checks and research the track record of your business. Personal guarantees may also be required.
Unsecured lending is normally a quicker process, due to a simplified legal process and no need for professionals involvement such as valuations.
The Alternative Finance market is vast and there could be multiple funding solutions and structures available to support your business. As an independent broker we are ideally placed to guide you through the options and introduce you to the right funding (which could be unsecured lending.)