Is your business going through a tough time? Does it need immediate funding to keep up the cash flow? As a business owner, you can reach out to diverse options available under the business loan category.
These loans allow you to borrow money with assets or without assets. You can opt for any of them depending on your ability and preference. As they cater to different purposes, mind your own purpose at the time of applying.
If you do not want to put the assets of the business at risk, you can opt for the collateral-free funding option. Now, getting unsecured business loans from a direct lender is a bright possibility. Any business stuck in debt can think of taking up this opportunity.
However, before you hop into the borrowing journey, make sure that this is a convenient option for you. Otherwise, you cannot save your business from free fall. Meanwhile, you can rely on the information put forth in this blog to understand unsecured funding to its core.
An in-depth analysis of collateral-free business funding
The relaxation from the collateral factor is itself an advantage that businesses can avail of. However, the need for money should not be super significant, as loans do not need the support of assets. Therefore, the requirement should not be more than £ 250000 or else there is no scope for you.
Look through the characteristics of these loans
The features that you can look for in this type of financing option are:
No heavy-weight eligibility criteria
It has already been proved that these loans highlight flexible criteria. Your business does not have to say goodbye to any of its assets to fetch the required money. There will be no restriction to place assets in favour of the loan money.
Your business can be small or big but should fit the minimum eligibility conditions. The minimum turnover requirement is a must to fulfil or else the lender cannot make sure about loan repayment.
Your business should not be too young like just three or four months old. It should have records showing it is operating for more than 6 months.
No revelation of credit status
Your business might have a questionable credit status. It will not have any impact on the lending criteria. You may rest assured that the loan provider will not examine the business credit background.
In addition, they will not even enquire about your credit history. These loans are convenient to obtain even when the credit stature is not stable. The lender will emphasise the current financial situation of your company to make a decision about loan approval.
Repaying becomes a lot easier
These loans offer enough time to pay back loan debts. On top of this, it allows flexible repayment in small amounts over months. You will be under no obligation to return the loan amount with interest in one-go.
The duration can be broken down into parts for ease of repayment. You can pay back each instalment after a regular schedule. Repayment would be easy if you keep that much amount ready on the due date.
Such an arrangement ensures about lesser chances of defaults. As a result, your business will see advancement in its credit stature also.
Repercussions after missing payments
The very thought of penalties due to late payments can give you a chill. You should be scared of this thing or else you cannot stick to the schedule for repayment. Escaping is not possible once you do this blunder.
It would be better for you to be alert from before. Plan how you can pay back the loan debt before you apply for the financing option. If you do not know from where you can gather money for repayment, drop the idea of borrowing at once.
Once you accept the loan amount, you cannot step back from repayment. Apart from heavy penalties, your business will also have to face further imprints on the credit profile. All these together will ruin the financial fortune and condition of your business.
However, you do not have to fear losing assets, as these loans are collateral-free funding. In future, you will not get financial support from lenders. Besides, even if they agree to help you, they will levy high interest to compensate for the risk factor.
Options you can consider apart from unsecured funding
It does not matter if you have settled with the idea of getting these loans. There is nothing wrong with knowing the alternatives you can opt for besides this loan option.
This funding option does not mean that you will have to use your existing assets. This is applicable when your business needs equipment or machinery. It enables you to obtain the new asset without paying the money upfront.
You can reap the benefits of provisions like hire purchase, operating lease and finance lease to arrange money for the purchase. This financing option facilities the distribution of the cost so that you can bear its payments easily.
Although you cannot become the owner without completing the payments, you can replace and upgrade the asset with this option. All you need to do is to contact reliable business finance brokers.
They can take you to the right finance provider only. They have the knowledge and experience to guide you in the best possible way.
Suppose a huge amount of cash is stuck in your invoice. Practically, the invoice has become useless, as the client is not paying you the money. Take the help of the invoice financing option. You can unlock almost about 90% of the outstanding invoice amount.
Here, you will receive money against your invoice. No need to grieve about delayed payments from clients when you can use the invoice you draw out money for your next project.
The bottom line
Unsecured loans for business seem like a lucrative financing opportunity. The biggest reason is the non-involvement of the collateral factor. Do not get carried away with this one feature!
Enlighten yourself about the other pros and overall cons of getting this loan option. You cannot drag your business to any uninvited problem by borrowing at the wrong time.
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.