Unsecured Business Loans: The Different Types to Choose From
If you own a business and need a loan, but you don’t have any assets to provide the lender as collateral, don’t fret. There is still a way to get a business loan with no assets. An unsecured business loan is the safest route that you can take to get the funds you need for your business.
In this article, we’ll dive deeper into what an unsecured business loan is to give you a better understanding of what it is and how you can apply for one.
Unsecured Business Loan
An unsecured business loan may sound dangerous, but it’s just a term used in the finance industry that means it doesn’t require any collateral. As we said earlier, this type of loan is usually the best route for businesses that don’t own considerable assets.
Instead of using collateral for assurance, the lender will use different criteria to decide whether to approve the loan or not.
An unsecured business loan will take into consideration the credit history, credit score, cash flow, and the perceived ability of the borrower to repay the loan. Moreover, a personal guarantee may also be required for this type of loan, which means that you can use personal assets to cover the outstanding debt if you are unable to repay it.
The different types of unsecured business loans
Unsecured business loans also provide plenty of flexibility as multiple types are available. Each one is best suited for certain situations, so take the time to decide.
- Credit cards: Small businesses often use credit cards as a form of unsecured finance. Using credit cards allows companies to make purchases and repay them over time. However, this type of loan can be expensive.
- Overdrafts: This involves revolving credit. Business owners can draw and repay when it’s convenient based on a predetermined credit limit. With an overdraft, a business owner can overdraw the transaction account to access the funds.
- Lines of credit: Similar to overdrafts, lines of credit also involve revolving credit. However, the funds are in a separate facility in which business owners need to transfer money to the account as needed.
- Online business loan: There are now plenty of online business lenders that allow business owners to get a loan with no assets. Online lenders rely on technology to look into the accounting data to see the health of the business and determine the amount a business owner can borrow. This type of loan is quickly gaining in popularity because of the fast turnaround time, as borrowers can get an answer within 24 hours. An online business loan is typically offered in the short-term—between six months and three years.
- Buy now, pay later: This form of business loan is pretty straightforward. The loan allows borrowers to purchase products and services and get an extended period to pay.
If you need a business loan but have no assets to spare, getting an unsecured business loan is your chance to gain access to funds for your business’s growth. These are various types of unsecured business loans to choose from, so you need to select the right type that will suit your needs.
Obtaining a business loan can get tricky. That’s why Business Loan Experts are here to help you find the ideal loan from a reputable lender in Melbourne. Contact us today for a consultation.