Unsecured business loans enable you to fund your business without providing collateral. This type of loan is efficient for a business as it won’t have to risk losing its assets in the event of a default on loan repayment. Today, many lenders offer unsecured business loans for new businesses. However, the terms of these lenders may differ from one another based on various aspects.
The following are the factors to consider when looking for the best lenders providing unsecured business loans for start-ups;
Approval rate for unsecured business loans
When funding your start-up through unsecured business loans, you will need to get your loan approved before accessing funds. Different lenders have different requisites that their prospective borrowers need to meet. Despite unsecured loans not requiring collateral, some lenders may have strict underwriting policies that impede the access of funds. To reduce the chances of a loan being declined, you should consider lenders with high approval rates.
Required paperwork for unsecured business finance
Depending on your lenders’ policies, you may be required to provide information including bank statements, driver’s licence, annual revenue estimates, ownership information, interim and audited company financials and business contact information. Lenders with minimal paperwork are likely to ease your loan application process consequently helping you access funds quicker.
Interest rates for unsecured small business loans
Unsecured business loans generally have high-interest rates compared to secured business loans. This is because they do not require collateral; hence, lenders tend to impose higher interest rates to offset the risks. However, interest rates may vary from one lender to another, depending on factors such as industry type, the time in business, risk profile and cash flow. Lenders offering unsecured business loans for businesses at lower interest rates could be the best choice for you since you won’t have to pay more in the long run. For example, interest rates ranging from 7% to 15% could be an ultimate choice for your business.
To know more about interest rates for unsecured loans contact our lenders
Repayment terms for unsecured loans
Repayment terms can have different requirements. Flexible repayment terms in unsecured business lending allow you to structure your loan repayments seamlessly into your monthly budget. You should opt for lenders who offer affordable repayment terms. For example, a repayment term of 10% to 20% of your monthly income could be suitable.
Repayment schedule for unsecured business loans
Different unsecured business loan lenders offer different repayment schedules. Some lenders may require to you pay off your loan on a weekly basis while others may offer a biweekly loan repayment schedule. Monthly loan repayment schedule is the most common among lenders. Some lenders may also offer quarterly loan repayments. Based on your projected periodical income flow, you should select the most suitable loan repayment schedule that would work best for your business. For example, if your business earns more revenue weekly, you can opt for a weekly loan repayment schedule while if you earn more revenue per month, then you should opt for a monthly loan repayment schedule.
Read more about 5 Reasons Why Unsecured Business Loans Help Businesses Grow
Loan amount for the businesses
You should be able to access the loan amount you deem essential for your business. Some lenders may limit the loan amount they offer their borrowers, which may end up not meeting your business objectives. To increase the chances of accessing more funds, you should consider lenders with larger loan amounts. Although unsecured business loans are typically lower than secured business loans, the amount of loan offered by various lenders may vary.
Want to know the difference between secured and unsecured business loans click here >>
Monthly turnover requirement
Your monthly turnover basically calculates how fast your business sells its inventory or the rate at which it collects cash from the accounts receivable. When applying for an unsecured business loan, you should consider lenders whose monthly turnover requirement conforms to your monthly turnover. Commonly, a majority of lenders consider borrowers with a monthly turnover above $5000.
The overall reputation of a lender is significant. Prospective borrowers can research lenders overall reputation by looking at customer reviews, reputation in the financial services industry and their financial strength.
The responsibility of choosing an ideal lender lies with the borrower. Before deciding on a lender for your business finance, you should ensure you will be reaping benefits in the long run.
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