Small Business Loans

What is an unsecured business loan?

Unsecured business loans allow business owners to borrow money without using valuable business assets as security for the lender. This is a popular funding option for small businesses that may not have assets they can provide as collateral for unpaid loan repayments.

Small unsecured business loans tend to have higher interest rates and often require a director’s personal guarantee. This guarantee is a legally binding document that makes the business owner personally liable to pay the loan repayments if the business defaults on a payment.

What is a secured business loan?

Secured business loans allow small businesses to borrow money on the condition that the business offers ‘security’ if the company defaults on the repayment of the loan. This security includes business assets such as property and equipment. The lender will take these assets if the repayment fails.

These loans work best for small businesses with access to valuable assets that they can use as collateral. When applying for a secured loan, the lender will consider the proposed asset and may ask for a valuation to be carried out.

Once the asset, loan amount and repayment structure have been agreed on, you will then give the lender ‘charge’ over the item. This ultimately means that the lender will hold legal authority of the selected item if your business defaults and doesn’t manage to pay back the loan.

Please be advised that the amount of money you want to borrow will need to be equal to the value of the item you’re offering as security.