An unsecured business loan is a loan that requires no collateral and utilises a financial product that lends against the cash flow of your business. If you start a new business or you want to expand an existing one, you may consider third-party financing, such as a business loan. There are two types of business loans: secured loans and unsecured loans. While a secured business loan is backed by collateral, an unsecured business loan is not. Obtaining an unsecured business loan has advantages and disadvantages.
- No Security Required
- Easy Repayments based on Cash Flow
- Minimal paperwork
- Funding in 24 hours
- Competitive Pricing
- Loans from $5,000 up to $500,000
- High approval rate for new business owners with a registered ABN and trading for more than 6 months.
- Easy approvals of an unsecured business loan by demonstrating the ability to repay the loan.
- The key benefit of unsecured business loans is NO collateral or security is required, protecting your assets.
- Unsecured Business Loans are usually used by businesses for general cash flow purposes.
- The advantage of using unsecured business loans is fast settlement within 24 hours.
- With unsecured business loans the lender takes into account the cash flow being generated by the business to provide an approval.
- Business trading for more than 6 months
- Monthly Turn over of more than $ 5000
- Registered ABN
For an unsecured business loan of 100k or less – Drivers Licence and 3 – 6 months business bank statements.
For an unsecured business loan of 100k to 300k – Drivers Licence, 12 months bank statements, Interim & audited company financials (Balance sheet & Profit & Loss), Accounts payable & receivables ledger.
- General working capital
- Purchase stock in bulk to get bulk discounts
- Deposit for shipments of stock, equipment etc ordered
- Tendering for projects
- Buy an existing business or open up a new branch
- Consolidate Debts
- Marketing Expenses and advertising
- Pay wages during peak season
- Renovation on refurbishments expenses
You don’t need to tie up your assets to access the business funding you need.
You’ll be able to take out an unsecured business loan without the stress of putting your assets at risk. It can also act as a viable, accessible option for businesses with little or no tangible assets.
Quick Access to Capital
Compared to other financing options, unsecured loans can be assessed and approved faster. This is because they don’t require any security. The majority of our lenders strive to complete applications within a short period of time.
The lender will endeavor to make your loan repayment affordable and transparent by building your loan based on your businesses financial circumstances.
We will help you find the best and most accomplished unsecured business loan lenders, which will ease your loan approval. Furthermore, you will get significant help from the lenders as they have vast experience in assisting businesses similar to yours.
- No collateral required.
An unsecured loan doesn’t need security. Consequently, this minimises the risk of losing your personal or business assets in the event you default on loan repayments. This distinguishes it from secured loans, whereby you can only be granted a loan in the by providing security, which could later be used to compensate for loan default.
- Amount of loan not constrained by the value of an asset.To access a particular secured loan amount, you need to provide security that is of higher value than the loan amount that you wish to borrow. The loan amount to be offered generally ranges between 60 and 70 per cent of the asset market value. Conversely, unsecured loans are not issued in regard to the asset market value but based primarily on the credit score of the borrower.
- Faster turnaround time.
Lenders can complete and process the application of unsecured loans online without having to evaluate the value of a borrower’s physical asset. This significantly boosts the turnaround time making it possible for borrowers to access funds in less than 24 hours after competing their applications. The swift turnaround time turn out to be useful when you need to access cash urgently.
- Builds up your credit history.
Unsecured business loans can be used to build credit history, which can be beneficial when applying for future loans. You only need to repay your loan instalments on time to improve the credit history of your business.
- Your business assets are safe.
Since an unsecured loan is issued without hypothecating collateral, lenders are unable to seize your business assets if you fail to pay off your loan. This consequently secures your assets.
- Higher rates of Interest.
Generally, unsecured loans pose a lot of risk to lenders since there is no collateral to be used as compensation in the event borrowers are unable to pay off their loans. As a result, lenders are prompted to charge higher interest rates as a method of compensation. The rate of interest depends on various factors such as the time in business, industry type, cashflow and the risk profile.
- Smaller loan amount.
Since there is no security provided, lenders may not be willing to risk approving a large funding amount for unsecured loans.
- Shorter Tenures.
To minimise the risk exposure, the lenders allow a tighter re-payment schedule for the borrowers to adhere to.Unsecured business loans usually have tighter repayment schedules purposed to reduce the risk exposure for lenders. Flexible repayments include daily, weekly, fortnightly or monthly repayment options.
Despite the favorable requirements and terms during application, an unsecured loan must be paid on time to have and maintain a good credit score.
- Loan eligibility
You don’t need to put your assets at stake when applying for unsecured business loans.The business must be trading for at least 6 months under an ABN and should be generating at least $5,000 in revenue per month.Conclusively, unsecured business loans can be the best, or the worst choice for you — depending on several variables including your financial condition, credit score, the purpose of the loan etc.You can call 1800 864 769 for an obligation free consultation with a lending consultant.
Aside from an unsecured business loan, merchant cash advances and lines of credit are also viable options for financing.
Merchant Cash Advance
A merchant Cash Advance exhibits an innovative substitute for a conventional small business loan. It helps you meet your business objectives by allowing you to access the working capital from the lender, who basically uses your projected future debit and credit card sales to offer you working capital.
The benefit of using an MCA is the flexibility aspect. It allows you to repay your advance based on the daily sales income. During the repayment period of your advance, a small percentage of the debit/credit card sales is retained until you complete paying off the advance. Repaying based on your daily sales income enables you to make smaller payments in the wake of a cash flow slowdown.
You may need a Merchant Cash Advance if:
- You need flexibility
- Your business accepts customer payments in the form of credit cards.
- You need a simple and swift financing solution.
- Your sales fluctuate
- You’re not interested in paying monthly minimums.
An merchant cash advance allows you to qualify for business cash advances based on factors including the repayment potential, past credit history and the existing business volume.
The short and simple approval process makes merchant cash advances an easy and convenient way of accessing funds. When applying for a merchant cash advance, you should keep in mind that lenders will be looking at your credit score to calculate the loan you can access at that particular time. If you have a higher credit score, you are likely to qualify for a higher amount of money accompanied by a lower interest rate while if your credit score is lower, you are likely to qualify for a lower amount of money accompanied by a higher interest rate.
You can access an agreed amount whenever you need it. A business line of credit entitles you to pay interest only on the funds drawn, not on the entire facility.
Some finance companies also offer similar services called lines of credit to certain types of businesses. Hubbe can assist you in getting fast, flexible funding to business that need it. For businesses looking for funds to get in on an amazing deal on inventory, or needing to ramp up personnel for an upcoming promotion, lines of credit can make things happen. That new piece of equipment to make your business more efficient can be a reality with a line of credit.
There is also a relatively new type of financing available in the unsecured financing market. Although it is not completely unsecured, it may provide the best of both worlds for both lenders and borrowers alike. The alternative option available is a partially secured business loan. A growing number of lenders now offer partially-secured loans for business, and for many entrepreneurs and lenders, this really could be the most attractive option available. This type of business loan provides borrowers the ability to be approved for a business loan without having to put up too much collateral. This tends to make lenders a little more willing to lend because they are still somewhat protected by the collateral that is secured. In addition, these loans are usually not forgiven by bankruptcy courts in their entirety, so lenders can feel more secure knowing that at least some, if not all of their money, is recoverable.
While an unsecured loan may not be right for every business, it may be a viable option for yours!