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Business Loans

Securing funding for your business

Business Loans are a common form of funding; either unsecured or secured, using either residential or commercial property as collateral.

They are a fantastic way to raise cash equity if your business has no tangible assets. Available to both limited companies and sole traders, they may require a personal guarantee and are available either on an unsecured or secured first or second charge basis.

Below, we take a look at the benefits of both unsecured and secured business loans.

 

Unsecured Business Loan

Unsecured business loans are a type of financing where a business borrows money without providing specific collateral as security for the loan. Unlike secured loans, unsecured loans do not require the business to pledge assets such as property, equipment, or inventory. Instead, these loans are typically approved based on the borrower’s creditworthiness, financial history, and the overall health of the business. Here are some key features and considerations for unsecured business loans:

Businesses with strong credit profiles are more likely to secure favorable terms for unsecured financing.

Unsecured business loans do not require the borrower to provide specific assets as collateral. This means that the business does not risk losing specific assets if it fails to repay the loan.

 

Key features of unsecured business loans include:

Creditworthiness: Lenders focus heavily on the creditworthiness of the business and its owners when approving unsecured loans. A strong credit history, a good credit score, and a positive financial track record increase the likelihood of approval.

Loan Amount and Interest Rates: The loan amount for unsecured business loans is often determined by the borrower’s creditworthiness and financial strength. Interest rates for unsecured loans tend to be higher than those for secured loans, as lenders take on more risk.

Loan Terms: Unsecured loans may have fixed or variable interest rates, and the repayment terms can vary. Businesses may have a set repayment period with fixed monthly payments or flexible payment structures, depending on the lender.

Loan Purpose: Unsecured business loans can be used for various purposes, including working capital, business expansion, purchasing inventory, marketing, or covering unexpected expenses.

Application Process: The application process for unsecured loans typically involves providing detailed information about the business, its financial statements, cash flow, and the purpose of the loan. Lenders may also assess the borrower’s personal and business credit history.

Risk and Interest Rates: Since unsecured loans pose a higher risk for lenders due to the lack of collateral, interest rates are often higher compared to secured loans. The risk is reflected in the interest rate charged to compensate for the absence of collateral.

Personal Guarantee: In some cases, lenders may require a personal guarantee from the business owner or another party. A personal guarantee means that the individual is personally responsible for repaying the loan if the business is unable to do so.

Lender Options: Unsecured business loans can be obtained from various sources, including traditional banks, online lenders, credit unions, and alternative financing companies. Each lender may have different eligibility criteria, interest rates, and repayment terms.

Quick Approval Process: Unsecured loans often have a quicker approval process compared to secured loans since there is no need for a detailed assessment of collateral value. This makes them a viable option for businesses in need of immediate funding.

  • Available to Limited Companies and sole traders
  • No security required
  • Great option if there are no tangible assets within the business
  • Funding available from £10,000 up to £2m
  • Director’s guarantees required

 

Secured Business Loans

Secured business loans are a type of financing in which a business borrows money by pledging collateral to secure the loan. Collateral serves as a form of protection for the lender in case the business is unable to repay the loan. The collateral could be assets such as real estate, inventory, equipment, or accounts receivable. Here are some key features and considerations for secured business loans:

 

Key features of secured business loans include:

Security: Secured business loans can provide businesses with access to capital while offering lenders a level of security through collateral.

Loan Amount and Interest Rates: Loan Amount: The amount of the loan is often determined by the value of the collateral. Lenders may offer a percentage of the collateral’s appraised value.

Interest Rates: Secured loans typically have lower interest rates compared to unsecured loans because the collateral mitigates the lender’s risk.

Loan Terms: Repayment Period: The repayment period for secured business loans can vary, but it is often determined by factors such as the purpose of the loan, the type of collateral, and the financial stability of the business.

Amortization: Some loans may have fixed monthly payments, while others may have flexible payment structures, including balloon payments or interest-only periods.

Loan Purpose: Secured business loans can be used for various purposes, including business expansion, purchasing equipment, working capital, or refinancing existing debt. The loan purpose may influence the terms and conditions of the loan.

Creditworthiness: While secured loans are backed by collateral, the creditworthiness of the business may still be a factor in the approval process. Lenders may consider the business’s financial history, credit score, and overall financial health.

Risk of Collateral Loss: If a business fails to repay the loan, the lender has the right to seize and sell the collateral to recover the outstanding debt. Businesses should carefully assess their ability to meet repayment obligations to avoid the risk of losing valuable assets.

Documentation and Application Process: Lenders typically require detailed documentation, including information about the business, financial statements, a description of the collateral, and a business plan. The application process may also involve a thorough assessment of the collateral’s value.

Lender Options: Secured business loans are offered by various financial institutions, including banks, credit unions, and online lenders.

  • Available to Limited Companies and sole traders
  • Funding can be secured against residential or commercial property
  • Great option if there are no tangible assets within the business
  • Funding available from £10,000 up to £2m
  • First and Second Charge funding available

 

If you would like to discuss how our Business Loan solutions can help fund your growth, simply contact us via the details below:

0333 772 1782

info@liquidcf.co.uk

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