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    Get an Unsecured Loan With Flexible Rates, Terms, & Fees in 2020

    There are many reasons why a business may need to raise finance. Perhaps there is a need to buy new equipment or upgrade premises. It could be that there is a temporary cash flow issue that needs to be resolved or maybe the business is ready to expand and move up to the next level. Whatever the case unsecured loans are a solution used by many. 

    Businesses have the choice of arranging these with a number of banks and other financial institutions and, for added convenience, it’s also possible to arrange unsecured loans online. Unsecured business loans are available for a wide range of amounts and for different lengths of time over which they need to be repaid. This provides valuable flexibility for businesses who can choose the best and most affordable solution for their own particular needs and set of individual circumstances.

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    What is an Unsecured Small Business Loan?

    As the name suggests, these are small business loans that do not need any kind of security to be put up by the borrower. The alternative to taking out unsecured small business loans is to choose a secured loan in which assets like vehicles, property or equipment are put up as collateral against the loan. In the case of the latter, the lender is legally entitled to claim these assets as their own if the borrower defaults on payments and no other agreement to rectify the situation can be reached. There are advantages and disadvantages of taking out unsecured small business loans. For example, they tend to be faster to arrange and involve less paperwork than secured loans. But because the loan is unsecured it will feature a higher interest rate as the risks of lending the money will also be perceived as being higher.

    How Unsecured Business Loans Work

    These are some of the simplest ways for a business to raise essential capital for almost any purpose that they want. That’s because they are different from secured loans which may need a more complex process before an agreement is reached. For example, property being used as security may need to be valued and legal papers may have to be completed. On the other hand, unsecured small business loans just need the application to be processed once the lender has received all the information that they need. The way that these loans work is equally straightforward. Once a business has worked out how much they need to borrow it’s a question of looking at the monthly repayments that will be required. There is some flexibility here as by agreeing to pay back over a longer term the monthly amount can be reduced – although the interest on the payments will mean that the total repayment amount will be higher. When the optimum repayment period has been worked out and the loan has been approved it’s just a matter of making the regular payments for the agreed term.

    How to Apply for Unsecured Business Loans

    One of the really good things about unsecured small business loans is just how easy it is to apply for them. The first thing to do is to look around for the best small business loans that are available, generally these will be the ones with the lowest interest rates but other criteria also apply. These will include the terms that they are available over and the speed with which the loan can be arranged and the money deposited in your business bank account. Once the best one has been chosen it’s a question of filling in the application form and providing all the supporting information that will be needed. This usually includes a few months’ worth of bank statements as well as the profit and loss accounts for the business. Lenders will also check your credit score and credit history before making a decision. Once everything has been checked and approved the money will be released. Then repayments start at the agreed rate and continue to the end of the agreed loan term.

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    Types of Unsecured Business Loans

    There are three main types of unsecured business loans. Which one you choose depends on your particular needs and circumstances. Within the three kinds, there are a number of variables between different lenders so make sure to carefully check which kind of unsecured loan from which kind of lender would suit you best.

    Long-Term Loans

    This is the most common form of unsecured small business loan and the term is generally between one and five years. These loans tend to be larger in size and are used for major investments in a business, for example to buy new equipment or for company expansion.

    Short-Term Loans

    Short-Term loans are more often used by businesses that are facing issues with cash flow or for other temporary needs such as buying more stock to fulfil unexpected demand. They are generally taken out over between six months and two years and repayments may need to be made weekly instead of the more usual monthly arrangement.

    Merchant Cash Advance

    With a merchant cash advance, the lender is effectively buying a part of a business’s projected revenue and pays for it with a cash lump sum. Repayment amounts can fluctuate along with income and in some cases they are paid directly from a merchant account to the lender either on a weekly or monthly basis.

    Common Unsecured Business Loan Misconceptions

    There are a number of myths and misconceptions regarding small business loans that are taken out with no collateral being provided as security. Here are three of the most common ones.

    Unsecured Business Loans Mean No Liability

    Just because a business hasn’t put up any definite security to support their loan it does not mean that defaulting on the loan will involve no liability. There is still the legal requirement to make the payments as promised.

    Unsecured Business Loans Protect the Borrower

    While the lender is not protected by having collateral in place this doesn’t, therefore, mean that the borrower is protected. If the latter fails to keep up with the payments as agreed there will almost certainly be consequences.

    Unsecured Business Loans are Fully Unsecured

    Most lenders, even for unsecured small business loans, will still need a personal guarantee from at least one of the people running the company that the loan will be repaid as agreed. It is possible to refuse to provide a personal guarantee but this will greatly reduce the likelihood of the loan being granted at the best rate, if at all.

    Small Business Loans Unsecured by Collateral

    Just because small business loans are unsecured by collateral it doesn’t necessarily mean that they will not represent good value. In fact, the best small business loans of this kind can sometimes be just as competitive as secured alternatives. It is a question of thoroughly searching the many options available for the best one to suit the borrowers needs and circumstances. Repayment amounts can be further adjusted by changing the loan term and interest rates can be lowered for applicants with particularly good credit scores. Most lenders are very up-front with their requirements for applicants which can be a great help when it comes to making the right choice and decision.

    Unsecured Loans for Bad Credit

    It might be easy to assume that unsecured loans for bad credit histories would be few and far between. After all, it could be expected that lenders would want at least some kind of security to offset what could be a credit risk. While it’s true that the choice of lender for unsecured business loans will be more limited when there’s a bad credit history, some will be prepared to consider applications. The loan, if it’s granted, will probably be at a higher than average interest rate and other conditions might apply. But many businesses would consider these to be compromises worth making to obtain the loan.

    Conclusion

    Unsecured business loans help a great many businesses to either thrive or to make it through periods when cash flow issues may affect them. With the flexibility to take them out over either the long or the short term, and therefore tailor repayments to suit, they can be very affordable too. For many businesses there is the added appeal of not having to put up any collateral for the loan, although personal guarantees may be needed. So it’s well worth searching around for the best unsecured loans from the many lenders who provide them and who help millions of businesses every year.