Compare Unsecured Business Loans

A business unsecured loan is a specialised business loan. They are provided by lenders to people who need to borrow money in order to get their business started, or to companies who need access to additional funds to support their cash flow or make a significant purchase.

Just like personal loans, business loans can be either secured or unsecured. Secured business loans are secured against the value of significant assets, such as property or machinery. If the borrower was to default on the payment the lender could be entitled to claim the asset.

Unsecured loans are not held against an asset in the same way, meaning they’re riskier for the lenders should the borrower default on the loan repayments. To offset the risk, lenders will sometimes charge higher interest rates as well as introducing more stringent affordability checks to ensure the business can make the repayments.

The main difference between business loans and personal loans is the criteria on which your financial security is assessed. For a personal loan, the focus is on your personal financial situation. Your income, savings, outgoings, and regular financial commitments are used as an indicator of whether or not you will be capable of keeping up with the repayments.

Business loans, on the other hand, look at the company’s finances and performance in recent years. Or, if you’re taking out a business loan to get the company off the ground, expect the lender to also take your personal track record in business into account, as well as your business plan and the skills and resources you have at your disposal. The lender will look at all this and more to decide how likely it is that you will be able to repay the loan within the timeframe discussed.

Since it’s in the lender’s best interest for your business to succeed, they will often offer advice and support as part of the service.

The level of interest you pay on a business unsecured loan will depend on a number of factors including the type of enterprise applying for the loan, whether it’s a start-up or established company, the length of time you will be making repayments, your company’s credit rating (and potentially your own if it’s a new business) and of course which bank or lender you go to.

Whether or not the interest on your business unsecured loan fluctuates will depend on what kind of loan you’ve taken out. Business unsecured loans are available with either a fixed or variable rate.

A fixed rate loan enshrines a fixed interest rate that will remain steady for the duration of the loan agreement.

On a variable rate business unsecured loan, the lender can change the interest rate, usually in response to changes in the Bank of England Base rate.

Business unsecured loans are designed for smaller sums of money. They are widely available for up to £250,000 but whether or not you will be able to borrow this much will depend on your personal and business circumstances.

Business loans, both secured and unsecured, offer a wide range of variation in repayment options. Short term loans of a few hundred or thousand pounds are usually repaid over a few short years, with some repayment options going as low as one year.

Longer term payments are available, with some banks offering 10-year payment plans, or even as long as 25 years. Variable rate loans tend to be available over a longer period of time than fixed rate loans.

The answer to this question is a combination of factors, namely how long you want to borrow the loan for, what level of advice and support you require and who offers the best interest rate to suit your circumstances.

Remember it’s also worth talking to providers to ensure you find them supportive and to check what would happen in the worst case scenario that you’re unable to meet a repayment.

Yes, there are a number of alternatives to business unsecured loans. These range from secured business loans – which require you to put up a business asset as security against your loan – through to credit cards and overdrafts for small sums of money, to asset financing, bridging loans, credit lines, invoice financing and more.