Unsecured loans are personal loans that are meant to be used for small and large expenses. When you use unsecured loans to meet business expenses, they are called business loans. There are various types of business expenses that you could meet with the help of these loans. For instance, if you need money to fund the gap in your working capital, you can use small business loans.
But qualifying for a small business loan is not as easy as qualifying for a personal loan. If your business has a separate legal entity, your business credit score will be taken into account. If not, your personal credit report will be regarded as a business credit score. In addition, you must be able to have enough business profits to prove your repayment capacity.
Every lender has different criteria. Some might follow strict criteria while others could be a little flexible. It all depends on their policy. It is enjoined that you do proper research in order to find a less expensive business loan deal.
How business loans help you grow your business
There are several ways in which unsecured loans can help your business grow effectively and efficiently:
- These loans provide asset protection
Unlike secured business loans, small business loans are not backed by collateral. This means that there is no risk of losing your assets. Your assets will remain safe and untouched even if you fail to discharge your business loan. However, remember that your lender will not sit calmly and composed if you make a default.
They will rather chase you by sending notifications and reminders. If you do not turn to them, they will send your account to collection agencies. Not only will this ruin your credit score, but it will also result in a CCJ.
- You can expand your business
Another advantage of small business loans is that you can expand your business easily. Expansion involves a large amount of money. If you are looking to expand your business and you do not have enough earmarked cash, you can decide to use a business loan to bridge the gap.
Whether you want to switch to a new location or you want to open a new branch, business loans might come in handy. Likewise, if you are looking to introduce a new product line or increase your production capacity, these loans could certainly be advantageous.
As long as you can prove your repayment capacity to your lender, you will be able to get approval from a direct lender.
- They can help you purchase new equipment
Another advantage of a business loan is that you can purchase new equipment. For instance, if you want to grow your production, you will need new machinery and equipment. Despite earmarked cash, you might have to rely on unsecured business loans in the UK.
These loans could help you meet your business goals. In order to get approval for a business loan, you must have a good credit score. With a decent credit score, your chances of getting approval for these loans are quite high. However, if your credit rating is poor, you will end up with high interest rates. Apart from that, you would end up with a restricted loan amount.
- You can seize growth opportunities
The success of a business depends on how you lead it. It depends on your potential to identify business opportunities. The sooner you react, the faster you grow. A golden rule of thumb says that you must be proactive if you want to grow your business. In order to have strategic growth, you will need to expand your business, run operations smoothly, initiate marketing campaigns, increase inventory, and so on. All these tasks could be done only when you have a great amount of business.
Unsecured business loans come in handy. When you have enough money, you can quickly seize growth opportunities. The good thing is that getting approval for these loans is not difficult if your credit score is good. You can borrow a large amount of money with a good credit report.
If you have no idea which lender would provide you with the best deal, you should try to consult a business finance broker. With the help of a broker, you would be able to compare deals. A broker would introduce you to a lender who is willing to accept your application.
- Unsecured loans improve cash flow
Cash is fuel for business. If you do not have sufficient cash, you would not be able to run your business. It is vital that you have enough working capital in order to ensure smooth business operations. There are several reasons why entrepreneurs struggle with poor working capital. This is because they do not receive from their debtors on time and struggle to pay their creditors, which leads to accumulating dues.
You should try to make an effort to improve cash flow. Cash inflow must be greater than outflow in order to ensure that you do not face a cash deficiency. However, if working capital is not sufficient, you may rely on unsecured loans. They can be used to meet business expenses.
These small loans will help you keep your business operations in order. In fact, you can also buy software and invest in other intangible assets.
- Unsecured loans help with marketing and brand building
Marketing is the most essential aspect of a business. It is an ongoing process, and hence, you must have a lot of money to effectively run marketing campaigns. If you do not have enough money to run marketing campaigns, you should consider unsecured loans. These loans could be a great help to help you achieve your business goals.
The final word
Unsecured loans could be fruitful when it comes to business growth. Whether you want to expand your business or invest in a new product line, these loans can help you keep the ball rolling. However, these loans are quite expensive. Make sure that you will not struggle to repay your debt.
Harry Kane is a financial writer and author who has covered wide topics related to business loans and finance for the last decade. He has been working as the Chief Contributor in finding out deals on various business finance products covered by Thebusinessfunds, a reputed business loan broker firm in the UK. The primary work of Harry is to analyse the loan requirements of various businesses according to their circumstances and affordability. He directly communicates with the loan aspirants and guides them to get the right loan matching their needs. He has a vast experience in finance writing, working with many major business firms in the UK. At Thebusinessfunds, Harry also used to write well-researched blogs covering the financial problems of business loan aspirants and providing relevant solutions. He is a postgraduate with MSc. in Banking and Finance.
