David Allan

Expertly compared by David Allan

Products Updated June 4, 2018

Unsecured Business Loans

If you’re a business owner or manager and are looking for an unsecured business loan then our expert brokers and lenders can get you a great low rate deal. Finance options available for all business types including sole traders, partnership, companies and the self employed.

Our business finance experts can compare the market from over 70 approved lenders. From start up's to SME's we've got you covered:

2 providers expertly compared:

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All credit types
Rated 5.0/ 5

Choice Loans Why?
Why?

This provider is our Expert’s Choice in its category as it won tops marks for the following.

  • TRUST
  • VALUE
  • EXPERTISE & KNOWLEDGE
  • CUSTOMER SERVICE

Learn more about how we review and assess the providers here on Lending Expert.

Loan Amount
£5,000 - £10,000,000

Representative APR
From 2.6%

Loan Term
1 - 35 years

Loan Type
Business Finance Broker

Status
Sole Trader & Limited Companies

Choice business loans can arrange a wide range of business finance solutions for business of all sizes. Services include business loans. Crowdfunded business Loans, Short term unsecured business loans, Merchant cash advance, Pension led business finance, Overdraft alternatives, Asset finance, Asset backed loans, Invoice finance, Commercial mortgages.

2 providers expertly compared:

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All credit types
Rated 5.0/ 5

Funding Options

Loan Amount
£5,000 - £10,000,000

Representative APR
From 2.6%

Loan Term
1 - 35 years

Loan Type
Business Finance Broker

Status
Sole Trader & Limited Companies

Funding Options is a credit broker and not a lender. They match small businesses like yours to different loan providers every day. Whether it's business loans, commercial mortgages, invoice financing, asset leasing, growth finance or something else, they can help find you a great deal.

About Unsecured Business Loans

Business loans are an essential tool to help a business grow. Whether you need to purchase new equipment or fund a refurbishment to get yourselves ahead of your competitors, you will need some form of funding to achieve your goals. If you are trying to raise money for a new business or need extra funds for an established company, an unsecured business loan is an excellent option for those with few assets or need finance quickly.

What is an unsecured business loan?

Unsecured loans for business funding

Unsecured loans for business funding

An unsecured business loan is a type of loan designed specifically for businesses that does not require you to put any form of collateral or security against the loan. Collateral is used in secured business loans as a form of guarantee that the amount borrowed will be paid back. If it is not paid back on time, the lender can seize the collateral as compensation.

As unsecured business loans do not require any collateral, they are an excellent option for new businesses that have no valuable assets. The lack of security to the lender does mean that interest rates on unsecured business loans are usually higher than secured business loans, although the application and approval process is generally much faster if no collateral is involved.

These types of loans are available from most major banks and finance companies, and because of the risk involved, they are usually only available for shorter loan terms and smaller loan amounts than their secured counterparts.

Requirements

Any business can apply for an unsecured business loan. As there is no need to provide collateral, there are no requirements for a specific value of assets to obtain a loan, although some lenders will require the business to have an annual turnover over a certain amount.

A large number of lenders will ask for a personal guarantee which will lower their risk of lending. A personal guarantee means that the borrower, usually a company director, is personally liable to repay the debt should the company fail to make the repayments.

Personal guarantees can either be limited or unlimited. A limited personal guarantee means that the lender and borrower have pre-agreed specific loan terms should a default occur, usually in the form of a set sum of money. An unlimited personal guarantee can be very risky for the individual as the lender has full freedom to recover the total debt from their personal finances; it can result in personal assets beings repossessed, such as a family home, car or even pension savings.

What can I receive?

There is a huge range of lenders out there that offer business loans, and the loan terms are different between them all. Some lenders will offer unsecured business loans up to £250,000 depending on the companies trading history and guarantor agreements, although most limit unsecured loans to £40,000.

Interest rates also vary significantly between lenders but start from roughly 3% for anywhere between six months to five years. Most unsecured business loans also incur additional fees and charges on top of the interest, including late payment fees, arrangement fees and completion fees.

The Positives

  • Ideal for small loan amounts as you can borrow the funds without exposing your business assets
  • A lot of unsecured loans offer flexible repayment periods up to five years
  • Established businesses can often get unsecured loans as the lender will assess the businesses trading history
  • Funds can be obtained quickly as the loan amounts are usually small and as they are unsecured they have fewer legal processes
  • No need to risk your property as security, which also saves on admin costs
  • If you are a relatively new business and don’t have enough securable assets to get a secured loan, you may benefit from an unsecured loan
  • In the unfortunate event of bankruptcy, unsecured loans are more likely to be discharged.

The Negatives

  • If your business doesn’t have a strong trading history, you might struggle to obtain a large unsecured loan
  • It can be difficult to find a lender willing to lend a large sum of money as an unsecured loan
  • You may need to risk your personal assets to obtain an unsecured loan
  • Interest rates are often high to protect the lender
  • Defaulting can result in a court order to give up the company and/or private assets.

If you are keen to find a finance option to help grow and expand your business, an unsecured business loan could be an excellent option for you. Be sure to shop around and thoroughly research the best deals available at the time, as these are constantly changing. Before making any decisions, carefully consider whether your business can realistically afford the repayments on the loan as defaulting can land both you and your company in a large amount of debt.

 

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