What is an unsecured loan?
An unsecured loan is a type of loan that does not require any collateral or security. This means that the borrower does not need to provide any assets (such as property) to secure the loan. Instead, the lender will assess the borrower’s creditworthiness and financial history to determine whether they are eligible for the loan.
Here at Newable Finance, we offer unsecured loans to small and medium-sized enterprises (SMEs) in the UK. These loans are available to limited companies with at least 12 months of trading history and a minimum annual revenue of £100,000. The loans can be used for any business purpose and do not require any security. Funding can be accessed quickly, with funding available in as little as 48 hours.
The interest rates for unsecured loans start from 8% per annum, and the terms can range from 6 to 72 months, depending on the borrower’s requirements.
What’s the difference between a secured and unsecured business loan?
A secured business loan is a type of loan that requires the borrower to provide collateral or security to the lender. This means that the borrower must pledge an asset, such as property or equipment, to secure the loan. If the borrower defaults on the loan, the lender can seize the collateral to recover the amount owed.
As mentioned above, an unsecured business loan is a type of loan that does not require any collateral or security. Instead, the lender will assess the borrower’s creditworthiness and financial history to determine whether they are eligible for the loan.
In summary, the main difference between secured and unsecured business loans is that secured loans require collateral, while unsecured loans do not. Secured loans are generally easier to obtain if the borrower has poor credit, but they come with the risk of losing the collateral if the borrower defaults. Unsecured loans are more difficult to obtain, but they do not require collateral and are generally offered to borrowers with good credit.
Who can get an unsecured loan?
This type of loan is typically offered to borrowers with a good credit score and a stable income.
If you are a business owner and your business has been trading for at least 24 months, you may be eligible to apply for an unsecured loan. In some cases, businesses that have been trading for less than 24 months may also be eligible if they are generating strong and consistent revenue.
It’s important to note that the eligibility criteria for unsecured loans can vary depending on the lender. Some lenders may require additional documentation or have stricter requirements than others. It’s always a good idea to research different lenders and compare their rates and terms before applying for a loan.
How much can I borrow?
The amount of money you can borrow through an unsecured loan is typically based on the financial performance of your business and your ability to repay the loan.
It’s important to note that different lenders may have different requirements and interest rates. It’s always a good idea to research different lenders and compare their rates and terms before applying for a loan.
Newable can help you apply for unsecured loans of £10,000 and above. However, the exact amount you can borrow will depend on several factors, including your business’s financial performance, credit score, and other eligibility criteria set by the lender.
Can I apply for an unsecured loan if I have bad credit?
Yes, it is possible to apply for an unsecured loan even if you have a bad credit score. In fact, if your business is already successfully repaying existing facilities, this may help your application for additional funding.
However, the eligibility criteria for such loans can vary depending on the lender. Some lenders specialise in offering loans to people with bad credit scores, but they may charge higher interest rates or require additional documentation.
What are the benefits of an unsecured loan?
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No collateral required:
The obvious benefit to unsecured loans is that they do not require any collateral or security. This means that you don’t have to put up any assets, such as property or equipment, to secure the loan.
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Quick approval process:
Unsecured loans typically have a faster approval process than secured loans, as there is no need for the lender to assess the value of collateral.
Since unsecured loans do not require collateral, the lender can focus on assessing the borrower’s creditworthiness and financial history, which can be done more quickly than assessing the value of collateral. This means that unsecured loans can be a good option if you need money quickly.
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Flexible repayment terms:
Unsecured loans often come with flexible repayment terms, allowing you to choose a repayment schedule that works for you. This means that you can customise your repayment plan based on your financial situation and preferences. For example, you may be able to choose a longer repayment term to lower your monthly payments, or a shorter repayment term to pay off the loan more quickly.
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No risk of losing collateral:
Since unsecured loans do not require collateral, you don’t have to worry about losing your assets if you default on the loan.
This means that the lender cannot seize any of your assets, such as property or equipment, to recover the amount owed. However, if you default on an unsecured loan, the lender may take legal action to recover the amount owed, which can negatively impact your credit score and financial history.
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Can be used for a variety of purposes:
Unsecured loans are commonly used for personal expenses such as home improvements, medical bills, or debt consolidation. They can also be used for business purposes such as working capital or equipment purchases.
Despite these benefits, it is worth noting that unsecured loans are generally more expensive than secured loans, as the lender is taking on more risk by not requiring collateral. For this reason, unsecured loans also require personal guarantees from directors/shareholders so if the business was to default the lender could pursue reclaiming their funds through personal assets.
Additionally, unsecured loans are typically offered to borrowers with a good credit score and a stable income, making them more difficult to obtain than secured loans. If you default on an unsecured loan, the lender may take legal action to recover the amount owed, which can negatively impact your credit score and financial history.
About Newable
For over 4 decades, Newable has been supporting thousands of businesses every year through the provision of Money, Advice and Workspace. An employee-owned business with a commitment to creating positive impact in all that we do, our team are on hand to help your business today.
Find out more about how Newable can help you and your business.